ADA defense lawyerDavid Bowie

Defendant car dealer appealed an order from the Superior Court of Los Angeles County (California), which denied the dealer's petition to compel arbitration of plaintiff buyer's suit alleging violations of the Consumers Legal Remedies Act (CLRA), Civ. Code, §§ 1750-1784, and other consumer protection laws.

The arbitration provision allowed an appeal to a three-member panel of a monetary award exceeding $100,000, allowed appeal of an award of injunctive reliеf, required advance paymеnt of arbitral expenses on appeal, and exempted repossession from arbitration. The buyer stated in his declaration that he was not given an opportunity to read the contract and was not aware that it had an arbitration provision on the reverse side. The ADA defense lawyer court concluded that the arbitration provision was unconscionable under Civ. Code, § 1670.5, and could not be cured by severance. Thus, its enforcement was properly refused under Code Civ. Proc., §§ 1281, 1281.2. The arbitration provision satisfied the two elements of procedural unconscionability, oppression and surprise, because the contract was one of adhesion and the buyer was not given an opportunity to read the provision. It was also substantively unconscionable because multiple aspects of the arbitration provision tilted it decidedly in favor of the dealer and caused it to be permeated by unconscionability. Moreover, injunctive relief from the arbitrator was inconsistent with the CLRA. Some of the offending clauses could not be cured by striking them.

The court affirmed the order.

Petitioner investors petitioned for a writ of mandate directing respondent trial court to set aside its order denying their motions to restore their lawsuit against real party in interest securities dealers alleging negligence, breach of fiduciary duty, and conversion to the active civil trial calendar. The California Court of Appeal, Second Appellate District, Division Seven, denied the petition. The investors petitioned for review.

The National Association of Securities Dealers (NASD) was a self-regulatory organization that licensed and regulated broker-dealers in the national securities industry. Through its wholly-owned subsidiary, NASD had adopted a code of arbitration procedure to govern the arbitration of disputes between its members and their customers. The Securities and Exchange Commission (SEC) had approved NASD's procedures. The court held that Cal. Code Civ. Proc. § 1281.85(a) authorized the California Judicial Council to adopt ethics standards for arbitrators appointed by arbitration providers, but it also held also that the Securities Exchange Act of 1934 preempted § 1281.85(a) and the California Ethics Standards for Neutral Arbitrators in Contractual Arbitration (California Standards) for arbitrations administered by the subsidiary. In determining that the NASD Code should preempt the California Standards, the SEC acted within its authority, and its determination was neither arbitrary nor unreasonable. A delay in arbitrator selection and appointment, resulting from uncertainty regarding the applicability of the California Standards, did not relieve the investors of their duty to arbitrate.

The appellate court's judgment was affirmed.