unconscionability doctrine in California

2026(Armendariz, supra, 24 Cal.4th at p. 114 .) Procedural and substantive unconscionability “ ‘must both be present in order for a court to exercise its discretion to refuse to enforce a contract or 7 clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. . . . [T]he more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.” (Ibid., italics omitted.) A. Jointly Construing the Arbitration and Confidentiality Agreements

2026(Ibid.) Cook’s mutuality analysis faithfully follows the “the doctrine of unconscionability [which] limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83 , 118- 119 (Armendariz) [finding that an agreement requiring arbitration only for the claims of the weaker party but a choice of forums for the claims of the stronger party is unconscionable].) Knight fails to provide us with a “good reason” to disa

2026This analysis ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532 ), “ ‘unduly oppressive’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925 ), “ ‘so one-sided as to “shock the conscience” ’ ” (Pinnacle[, supra,] 55 Cal.4th [at p.] 246), or “unfairly one-sided” (Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064].) All of these formulations point to the central idea that the unconscionability doctrine is concerned not with “a sim

2026In Kho, supra, 8 Cal.5th at page 130 , we considered the doctrine of unconscionability, not contract interpretation.

2026General legal principles and standard of review “ ‘[G]enerally applicable contract defenses, such as . . . unconscionability, may be applied to invalidate arbitration agreements without contravening’ the FAA. [Citations.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 246 (Pinnacle).) “Unconscionability consists of both procedural and substantive elements.” (Id. at p. 246.) “ ‘ “The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a cont

2026“Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. [Citations.] A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be ‘so one-sided as to “shock the conscience.” ’ ” (Pinnacle, supra, 55 Cal.4th at p. 246 .) This standard refers to “ ‘the central idea that the unconscionability doctrine is concerned not with “a simple old-fashioned bad 3 Armendariz was abrogated in part on another ground in AT&T Mobility LLC v. Concepcion

2023However, the doctrine’s application to arbitration agreements must rely on the same principles that govern all contracts.” (OTO, supra, at p. 125, citing Sonic Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1133 .) “The degree of unfairness required for unconscionability must be as rigorous and demanding for arbitration clauses as for any other contract clause.” (OTO, supra, at p. 125.) “A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. [Citation.] U

2019A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. ( Sonic II , supra , 57 Cal.4th at p. 1133 , 163 Cal.Rptr.3d 269 , 311 P.3d 184 .) Under this standard, the unconscionability doctrine " 'has both a procedural and a substantive **690 element.' " ( Ibid . ) "The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. [Citations.] Substantive unconscionability

2026If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of 6 We note that for purposes of an unconscionability analysis, it is irrelevant that Stoker did not assert any PAGA claims. “ ‘In determining unconscionability, our inquiry is into whether a contract provision was “unconscionable at the time it was made.” ’ ” (Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, 1134 , italics added; see also Najarro v. Superior Court (2021) 70 Cal.App.5th 871 , 882–883; Hasty, supra, 98 Cal.App.5th at p. 1063.) 24

2025(See Najarro, supra, 70 Cal.App.5th at p. 882-883; Hasty, supra, 98 Cal.App.5th at p. 1063; Subcontracting Concepts, supra, 34 Cal.App.5th at p. 212 .) 19 v. Moreno (2013) 57 Cal.4th 1109, 1145 [unconscionable terms include “‘terms (usually of an adhesion or boilerplate nature) that attempt to alter in an impermissible manner fundamental duties otherwise imposed by the law’”].) TBC argues that such an analysis conflates the concepts of unenforceability and unconscionability, and that Hasty “shoehorn[ed] a PAGA waiver into an unconscionability analysis.” TBC does not cite Najarro, Alberto, or S

2026General legal principles and standard of review “ ‘[G]enerally applicable contract defenses, such as . . . unconscionability, may be applied to invalidate arbitration agreements without contravening’ the FAA. [Citations.]” (Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 246 (Pinnacle).) “Unconscionability consists of both procedural and substantive elements.” (Id. at p. 246.) “ ‘ “The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a cont

2024All of these formulations point to the central idea that the unconscionability doctrine is concerned not with “a simple old-fashioned bad bargain” [citation], but with terms that are “unreasonably favorable to the more powerful party.” ’ ” (OTO, at pp. 129–130; Prima Donna, supra, 42 Cal.App.5th at p. 38.) Such terms include “ ‘ “provisions that seek to negate the reasonable expectations of the nondrafting party, or unreasonably and unexpectedly harsh terms having to do with price 13 or other central aspects of the transaction.” ’ ” (Sanchez, supra, 61 Cal.4th at p. 911 .) “These examples are

2026Substantive Unconscionability Substantive unconscionability “considers ‘the fairness of an agreement's actual terms’ [citation], focusing on whether the contract will create unfair or one-sided results [citation].” (Ramirez, supra, 16 Cal.5th at p. 493.) Contractual provisions are substantively unconscionable if they are “ ‘overly harsh,’ ” “ ‘ “unduly oppressive,” ’ ” or “ ‘ “ ‘so one-sided as to “shock the conscience.” ’ ” ’ ” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1244 (Baltazar).) Unconscionability doctrine is not concerned with bad bargains, “ ‘but with terms that are “unre

2026We find the unconscionability of the agreements dispositive and therefore affirm.2 (See Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436 , 445 [“[u]nconscionability in a contract is one reason a court may decline enforcement” of a contract].) A. Governing Law The doctrine of unconscionability “ ‘ “refers to ‘ “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” ’ ” ’ ” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243 (Baltazar); Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 12

2024(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 118 .) “‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘“oppression”’ or ‘“surprise”’ due to unequal bargaining power, the latter on ‘“overly harsh”’ or ‘“one-sided”’ results. [Citation.] ‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. ‘Essentially a sliding scale

2021“Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves.” [Citations.] In other words, the more 7 substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.’ (Armendariz v. Foundation Health Psychare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz).) “As we stated in Sonic II: ‘The unc

2026This analysis ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532 ), “ ‘unduly oppressive’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925 ), “ ‘so one-sided as to “shock the conscience” ’ ” (Pinnacle[, supra,] 55 Cal.4th [at p.] 246), or “unfairly one-sided” (Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064], 1071.) All of these formulations point to the central idea that the unconscionability doctrine is concerned not with

2026This analysis ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532 ), “ ‘unduly oppressive’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925 ), “ ‘so one-sided as to “shock the conscience” ’ ” (Pinnacle[, supra,] 55 Cal.4th [at p.] 246), or “unfairly one-sided” (Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064].) All of these formulations point to the central idea that the unconscionability doctrine is concerned not with “a sim

2026This analysis ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532 ), “ ‘unduly oppressive’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925 ), “ ‘so one-sided as to “shock the conscience” ’ ” (Pinnacle[, supra,] 55 Cal.4th [at p.] 246), or “unfairly one-sided” (Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064], 1071.) All of these formulations point to the central idea that the unconscionability doctrine is concerned not with

2026This analysis ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” (Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1532 ), “ ‘unduly oppressive’ ” (Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, 925 ), “ ‘so one-sided as to “shock the conscience” ’ ” (Pinnacle[, supra,] 55 Cal.4th [at p.] 246), or “unfairly one-sided” (Little [v. Auto Stiegler, Inc. (2003)] 29 Cal.4th [1064].) All of these formulations point to the central idea that the unconscionability doctrine is concerned not with “a sim

2024(OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111, 118 .) “‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘“oppression”’ or ‘“surprise”’ due to unequal bargaining power, the latter on ‘“overly harsh”’ or ‘“one-sided”’ results. [Citation.] ‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. ‘Essentially a sliding scale

2020Courts may use the unconscionability doctrine to protect “consumers against fees that unreasonably limit access to arbitration.” (Sanchez, supra, 61 Cal.4th at p. 920 .) A consumer seeking to avoid an arbitration agreement must make “a showing that . . . fees and costs in fact would be unaffordable or would have a substantial deterrent effect” on his or her decision to seek relief, which the court must determine “on a case-by-case basis . . . .” (Ibid.; see Penilla v. Westmont Corp. (2016) 3 Cal.App.5th 18 205, 218 [“‘it is substantively unconscionable to require a consumer to give up the righ

2022The Arbitration Provision Is Unconscionable “‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘“oppression”’ or ‘“surprise”’ due to unequal bargaining power, the latter on ‘“overly harsh”’ or ‘“one-sided”’ results. [Citation.] ‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. ‘Essentially a sliding scale is in

2022The Arbitration Provision Is Unconscionable “‘[U]nconscionability has both a “procedural” and a “substantive” element,’ the former focusing on ‘“oppression”’ or ‘“surprise”’ due to unequal bargaining power, the latter on ‘“overly harsh”’ or ‘“one-sided”’ results. [Citation.] ‘The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.’ [Citation.] But they need not be present in the same degree. ‘Essentially a sliding scale is in

2019(Maj. opn., ante , 251 Cal.Rptr.3d at p. 732, 447 P.3d at p. 695.) This unique, Berman-specific approach - and the majority's analysis and conclusion in this case - violate, and are thus preempted by, the FAA and its equal treatment principle, which preclude a court from "constru[ing an arbitration] agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law" ( Perry , supra , 482 U.S. at p. 493, fn. 9 , 107 S.Ct. 2520 ), from applying the unconscionability doctrine "in a fashion that disfavors arbitration," and from " 'rely[ing] on the u

2019(Maj. opn., ante , 251 Cal.Rptr.3d at p. 732, 447 P.3d at p. 695.) This unique, Berman-specific approach - and the majority's analysis and conclusion in this case - violate, and are thus preempted by, the FAA and its equal treatment principle, which preclude a court from "constru[ing an arbitration] agreement in a manner different from that in which it otherwise construes nonarbitration agreements under state law" ( Perry , supra , 482 U.S. at p. 493, fn. 9 , 107 S.Ct. 2520 ), from applying the unconscionability doctrine "in a fashion that disfavors arbitration," and from " 'rely[ing] on the u

2026“Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of whether they are overly harsh or one-sided. [Citations.] A contract term is not substantively unconscionable when it merely gives one side a greater benefit; rather, the term must be ‘so one-sided as to “shock the conscience.” ’ ” (Pinnacle, supra, 55 Cal.4th at p. 246 .) This standard refers to “ ‘the central idea that the unconscionability doctrine is concerned not with “a simple old-fashioned bad 3 Armendariz was abrogated in part on another ground in AT&T Mobility LLC v. Concepcion

2022(Rosenthal, supra, 14 Cal.4th at p. 413 .) “The unconscionability defense has been recognized by the United States Supreme Court as a general contract defense in California, and therefore a defense to an agreement to arbitrate.” (Fisher v. MoneyGram International, Inc. (2021) 66 Cal.App.5th 1084 , 1093, citing AT&T Mobility LLC v. Concepcion (2011) 563 U.S. 333 , 341–343; De La Torre v. CashCall, Inc. (2018) 5 Cal.5th 966 , 978–979.) In other words, the party challenging the arbitration agreement bears the burden to prove its unconscionability.

2026We find the unconscionability of the agreements dispositive and therefore affirm.2 (See Lange v. Monster Energy Co. (2020) 46 Cal.App.5th 436 , 445 [“[u]nconscionability in a contract is one reason a court may decline enforcement” of a contract].) A. Governing Law The doctrine of unconscionability “ ‘ “refers to ‘ “an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” ’ ” ’ ” (Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237, 1243 (Baltazar); Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 12

2018Unconscionability The doctrine of unconscionability " ' "refers to ' "an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party." ' " ' " ( Baltazar v. Forever 21, Inc. (2016) 62 Cal.4th 1237 , 1243, 200 Cal.Rptr.3d 7 , 367 P.3d 6 ( Baltazar ); Farrar v. Direct Commerce, Inc. (2017) 9 Cal.App.5th 1257 , 1265, 215 Cal.Rptr.3d 785 ( Farrar ).) There is both a procedural and substantive aspect of unconscionability; the former focuses on "oppression" or "surprise" due to unequal bargaining power, the latter on

2015Defendants rely upon the unconscionability analysis in Discover Bank v. Superior Court (2005) 36 Cal.4th 148, 153-163 (Discover Bank).

2014The California Supreme Court held that, in some arbitration agreements, the class action waivers were unconscionable under California law. 14 ( 36 Cal.4th at p. 160 .) More importantly, the California Supreme Court held that this application of the unconscionability doctrine was not preempted by the FAA. ( 36 Cal.4th at p. 166 .) The California Supreme Court explained that unconscionability is “a principle of California law that does not specifically apply to arbitration agreements, but to contracts generally.

2019As the trial court aptly explained: “Courts have held that the unconscionability doctrine applies to business contracts as well as consumer contracts because ‘even large business entities may have relatively little bargaining power, depending on the identity of the other contracting party and the commercial circumstances surrounding the agreement.’ ” (See A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 489-490 ; see also Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 818, fn. 13 [“Although most of the [unconscionability] cases have arisen in the consumer context, adhesion contrac

2007Critical to an unconscionability analysis is Scissor-Tail, supra, 28 Cal.3d 807 , in which the plaintiff contended he should not be compelled to arbitrate a dispute because the underlying agreement, at least to the extent it required arbitration of disputes between the parties, was “an unenforceable contract of adhesion.” (Id. atp. 817.) Scissor-Tail concluded the agreement was adhesive, i.e., a “ ‘standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.’ ” (Ib

2017Surprise involves the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them." ( *565 Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846 , 853, 113 Cal.Rptr.2d 376 .) *723 "Unconscionability analysis begins with an inquiry into whether the contract is one of adhesion. [Citation.] 'The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reje

2017Surprise involves the extent to which the supposedly agreed-upon terms are hidden in a prolix printed form drafted by the party seeking to enforce them." ( *565 Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846 , 853, 113 Cal.Rptr.2d 376 .) *723 "Unconscionability analysis begins with an inquiry into whether the contract is one of adhesion. [Citation.] 'The term [contract of adhesion] signifies a standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reje

2026The Legislature made this clear when it enacted section 22302—which applies the unconscionability doctrine to all consumer loans— at the same time that it lifted interest caps on loans exceeding $2,500.” (De La Torre, at pp. 976–977.) The Supreme Court rejected CashCall’s position as resting “on an assumed—but false—equivalence between interest rate caps and unconscionability.” (De La Torre, supra, 5 Cal.5th at p. 981 .) Instead, the high court held, unconscionability “is a flexible doctrine” that “requires more than just looking at one particular term in a contract, comparing it to a fixed be

2022A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. [Citation.] Under this standard, the unconscionability doctrine ‘“has both a procedural and a substantive element.”’ [Citation.] ‘The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. [Citations.] Substantive unconscionability pertains to the fairness of an agreement’s actual terms and to assessments of

2024This analysis ‘ensures that contracts, particularly contracts of adhesion, do not impose terms that have been variously described as “ ‘ “overly harsh” ’ ” [citation], “ ‘unduly oppressive’ ” [citation], “ ‘so one-sided 11 as to “shock the conscience” ’ ” [citation] or “unfairly one-sided” [citation.] All of these formulations point to the central idea that the unconscionability doctrine is concerned not with “a simple old-fashioned bad bargain” [citation], but with terms that are “unreasonably favorable to the more powerful party.” ’ [Citation.] Unconscionable terms ‘ “impair the integrity of

2019A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party. ( Sonic II , supra , 57 Cal.4th at p. 1133 , 163 Cal.Rptr.3d 269 , 311 P.3d 184 .) Under this standard, the unconscionability doctrine " 'has both a procedural and a substantive **690 element.' " ( Ibid . ) "The procedural element addresses the circumstances of contract negotiation and formation, focusing on oppression or surprise due to unequal bargaining power. [Citations.] Substantive unconscionability

2024Such a rule would seriously undermine the unconscionability defense.” (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1251 ; Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1289 [“A contract term may be held to be unconscionable even if the weaker party knowingly agreed to it.”].) 21 Nevertheless, we decide that RCS’s failure to either identify or append the applicable AAA rules created procedural unconscionability based on surprise.

2014(Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1290-1291 ; see Higgins, supra, 140 Cal.App.4th at p. 1251 [procedural unconscionability may exist even if plaintiff reads an agreement; a contrary rule would seriously undermine the unconscionability defense].) Of course, even a finding that a party’s failure to read the document may have contributed to procedural unconscionability does not end the inquiry.

2024Such a rule would seriously undermine the unconscionability defense.” (Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1251 ; Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1289 [“A contract term may be held to be unconscionable even if the weaker party knowingly agreed to it.”].) 21 Nevertheless, we decide that RCS’s failure to either identify or append the applicable AAA rules created procedural unconscionability based on surprise.

2014(Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1290-1291 ; see Higgins, supra, 140 Cal.App.4th at p. 1251 [procedural unconscionability may exist even if plaintiff reads an agreement; a contrary rule would seriously undermine the unconscionability defense].) Of course, even a finding that a party’s failure to read the document may have contributed to procedural unconscionability does not end the inquiry.