In Elite Logistics Corp. v. Hanjin Shipping Co., No. 12-56238 (9th Cir. Sept. 19, 2014) (click here for a copy of the decision), a majority of a Ninth Circuit panel issued a brief decision finding an arbitration clause to be unconscionable under California law. In affirming the district court’s order, the majority found procedural unconscionability because the plaintiff was presented with a take-it-or-leave contract, with no meaningful opportunity to negotiate. Regarding substantive unconscionability, the agreement’s shortening of the statute of limitations from 4 years to 30 days was overly harsh, and the agreement also contained a problematic limitation on remedies. Under the agreement, the arbitrators could not enjoin wrongful conduct, and this case involved allegations of continuing misconduct.
The dissenting opinion caught my attention because it set forth a different view of California unconscionability doctrine. The dissent criticized the majority’s application of California unconscionability law as superficial. The dissenting judge was critical of the majority’s reliance on pre-Concepcion unconscionability cases, and the dissenting judge also believed that under the California Supreme Court’s 2013 post-Concepcion opinion in Sonic-Calabasas v. Moreno, California unconscionability analysis was more rigorous and required a more fact-intensive showing. Under the dissent’s view of unconscionability as set forth in Sonic-Calabasas, the unreasonableness of a clause must be considered within the context of a clause’s commercial setting, purpose, and effect. The dissenting judge believed that the district court’s record lacked facts that would be relevant under this more rigorous, fact-intensive analysis, and thus, there was not a proper showing of unconscionability.
These different views of unconscionability reminded me that although Concepcion is often viewed as having an impact on the availability of class actions, I think Concepcion is also having an impact on how some courts treat unconscionability arguments in connection with bilateral, non-class arbitration agreements. For example, in Lucas v. Hertz Corp., 875 F.Supp.2d 991 (N.D. Cal. 2012), a judge candidly admits that pre-Concepcion, the clause at issue would likely have been held unconscionable, but after Concepcion, with its broad preemption language, the clause at issue was not unconscionable. I addressed these issues in a recent article, More Than Class Action Killers: The Impact of Concepcion and American Express on Employment Arbitration, 35 Berkeley Journal of Employment and Labor Law 31 (2014).