Enforce an Arb Against an ID Theft Victim? No Way!

David A. Szwak

Enforce an Arb Against an ID Theft Victim? No Way!

Postby David A. Szwak » Mon Oct 10, 2005 5:05 am

In Lawrence v. Household Bank [SB], N.A., 343 F.Supp.2d 1101 [U.S.D.C. M.D. Ala. 2004], the court stated: “There is an exception to the Prima Paint rule, however, for "cases where not merely the enforceability, but the initial formation or existence of a contract, including a disputed arbitration clause, is legitimately called into question, and must be decided by the court." Rainbow Investments, Inc. v. Super 8 Motels, Inc., 973 F.Supp. 1387, 1390 [M.D.Ala.1997] [Thompson, C.J.]. Cases in which there is no signed contract and in which one party denies the existence of an agreement fall into this category. The Eleventh Circuit has explained: "Under normal circumstances, an arbitration provision within a contract admittedly signed by the contractual parties is sufficient to require the district court to send any controversies to arbitration. Under such circumstances, the parties have at least presumptively agreed to arbitrate any disputes, including those disputes about the validity of the contract in general. Because the making of the arbitration agreement itself is rarely in issue when the parties have signed a contract containing an arbitration provision, the district court usually must compel arbitration immediately after one of the contractual parties so requests. "The calculus changes when it is undisputed that the party seeking to avoid arbitration has not signed any contract requiring arbitration. In such a case, that party is challenging the very existence of any agreement, including the existence of an agreement to arbitrate. Under these circumstances, there is no presumptively valid general contract which would trigger the district court's duty to compel arbitration pursuant to the Act. If a party has not signed an agreement containing arbitration language, such a party may not have agreed to submit grievances to arbitration at all. Therefore, before sending any such grievances to arbitration, the district court itself must first decide whether or not the non-signing party can nonetheless be bound by the contractual language." Chastain v. The Robinson-Humphrey Co., 957 F.2d 851, 854 [11th Cir.1992] [citations and footnotes omitted]. In resolving these "gateway issues," the court applies ordinary state common law governing the formation of contracts. Volt Info. Sciences, Inc. v. Board of Trustees of Leland Stanford University, 489 U.S. 468, 475-76, 109 S.Ct. 1248, 1254, 103 L.Ed.2d 488 [1989]; see also Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 63 n. 9, 115 S.Ct. 1212, 1219 n. 9, 131 L.Ed.2d 76 [1995]. [emphasis added.].”

David A. Szwak

Postby David A. Szwak » Mon Oct 10, 2005 5:17 am

Can a Consumer Be Bound By An Arbitration Clause Where There is No Consent?

The obvious answer is no. However, good reasons exist for that result. An identity theft victim cannot be bound by an arbitration clause in an imposted credit application. Can you imagine a defendant arguing that? Well, they have tried it. In the only known case on point, Discover Financial Services filed a motion to compel arbitration against an identity theft victim, James Riley, in consolidated actions captioned Riley v.GMAC, cause no. 1:01-CV-00869-WS-D [U.S.D.C. S.D. Ala. 12/16/02]. On December 16, 2002, docket entry #106, Judge Granade entered an unreported Order denying Discover’s Motion to Compel Arbitration, and Motion to Stay Discovery. Judge Granade found that the victim did not consent to any such arbitration clause and arbitration cannot be enforced absent an agreement to arbitrate. See attached. Undersigned counsel represented Riley in that action. The interesting point is that Discover tried to argue that because Riley had his own legitimate Discover account and that application/contract contained an arbitration clause, that somehow the court should apply that arbitration clause to a dispute and lawsuit involving the imposted credit application and account. It seems obvious that an impostor cannot provide the victim’s assent to an arbitration clause.

David A. Szwak

John Maranto v. Citifinancial

Postby David A. Szwak » Sat Nov 26, 2005 3:52 pm

John Maranto v. Citifinancial, USDC WD La.

Magistratr-Judge Hornsby rendered Report and Recommendation to reject and deny Citifinancial's motion to compel arbitration and stay case which it filed against plaintiff John Maranto, an ID Theft Victim. That is right. Citifinancial/Citibank is so arrogant that they think they can push an arb against an ID Theft Victim!!! Outrageous. Sanctionable. 15 U.S.C. 1681n[c]. It appears that the motion is sanctionable not only under FRCP 11, but also 1681n[c]. Bad faith filing.

David A. Szwak

Postby David A. Szwak » Wed Dec 14, 2005 9:26 pm

Maranto v. Citifinancial Retail Services, Inc.,
Slip Copy, 2005 WL 3369948, W.D.La., Nov 18, 2005

David A. Szwak

More ID Theft; No Arb Allowed....

Postby David A. Szwak » Mon Dec 19, 2005 7:46 pm

901 So.2d 1017, 30 Fla. L. Weekly D1262

District Court of Appeal of Florida,
Fourth District.
Judith Jones, Appellee.
No. 4D04-72.
May 18, 2005.

Background: Customer brought action against automobile dealership for negligence, gross negligence, unfair and deceptive trade practices, and a violation of the Credit Services Organization Act, alleging that salesperson used information contained on credit application to steal customer's identity and make fraudulent purchases and withdrawals. The Circuit Court, Seventeenth Judicial Circuit, Broward County, Leroy H. Moe, J., denied dealership's motion to stay and compel arbitration. Dealership appealed.

Holding: The District Court of Appeal, Taylor, J., held that customer's action did not fall within arbitration agreement.


Appellee, Judith Jones, became a victim of identity theft when she purchased a car at a dealership. She sued King Motor Company of Fort Lauderdale, Inc. (King Motor), alleging that a King Motor's salesman used the information contained on her credit application to steal her identity and make fraudulent purchases and bank account withdrawals. Her complaint included claims for negligence, gross negligence, unfair and deceptive trade practices, and a violation of the Credit Services Organization Act. In this appeal, King Motor challenges the trial court's order denying its *1018 motion to stay and compel arbitration. Because we agree with the trial court's ruling that appellee's claims are not subject to arbitration, we affirm.
[1] [2] An order denying a motion to compel arbitration is generally reviewed de novo. See Hirshenson v. Spaccio, 800 So.2d 670 (Fla. 5th DCA 2001). In determining whether a dispute is subject to arbitration, courts must consider three issues: (1) whether a valid written agreement to arbitrate exists; (2) whether an arbitrable issue exists; and (3) whether the right to arbitration was waived. See Seifert v. U.S. Home Corp., 750 So.2d 633, 636 (Fla.1999)(citing Terminix Int'l Co. L.P. v. Ponzio, 693 So.2d 104, 106 (Fla. 5th DCA 1997)).
We first note that the validity of the written arbitration agreement is not in dispute. Second, though the parties below advanced arguments concerning waiver of the right to arbitration, the record does not reflect a ruling on this issue. Third, appellant's point on appeal, that the arbitrator, rather than the judge, should have decided the issue of arbitrability, was not properly raised below. Therefore, the sole issue for our review is whether an arbitrable issue exists.
[3] The language in the arbitration clause is as follows:
Buyer/lessee acknowledges and agrees that the vehicle the buyer/lessee is purchasing or leasing from the dealer has traveled in interstate commerce. Buyer/lessee thus acknowledges that the vehicle and other aspects of the sale, lease or financing transaction are involved in, affect, or have a direct impact upon interstate commerce.
Buyer/lessee and dealer agree that all claims, demands, disputes or controversies of every kind or nature between them arising from, concerning or relating to any of the negotiations involved in the sale/lease or financing of the vehicle, the terms and provision of the sale, lease, or financing arrangements, the arrangements for financing, the purchase of insurance, extended warranties, service contracts or other products purchased as an incident to the sale, lease or financing of the vehicle, the performance or condition of the vehicle, or any other aspects of the vehicle and its sale, lease or financing, shall be settled by binding arbitration, conducted pursuant to the provisions of the Federal Arbitration Act, 9. U.S.C. Section 1 et seq. and according to the commercial arbitration rules of the American Arbitration Association. Without limiting the generality of the foregoing, it is the intention of the buyer/lessee and the dealer to resolve by binding arbitration all disputes between them concerning the vehicle, its sale, lease or financing, and its condition, including disputes concerning the terms and conditions of the sale, lease, or financing, the condition of the vehicle, any damage to the vehicle, the terms and meaning of any of the documents signed or given in connection with the sale, lease or financing of the vehicle, or negotiations for the sale, lease or financing of the vehicle, or any terms conditions, representations or omissions made in connection with the financing, credit, life insurance, disability insurance, vehicle extended warranty or service contract or other products or services acquired as an incident to the sale, lease or financing of the vehicle.
Either party may demand arbitration, by filing.... Buyer/lessee and dealer further agree that any questions regarding whether a particular controversy is subject to arbitration shall be decided by the Arbitrator.
(emphasis supplied).
King Motor looks to the broad italicized language above to support its position that appellee's causes of action arise out of, or relate to, the sales contract and, particularly, the financing associated with the vehicle sale. Appellee counters that her causes of action do not arise from or concern the sales transaction, notwithstanding King Motor's contention that "but for" the sale, there would not have been a theft of her identity.
[4] Seifert is instructive when considering whether a trial court should exclude certain tort and statutory claims from arbitration despite broad arbitration language. Deciding whether a particular claim is covered by a broad arbitration provision requires a determination of whether a significant relationship exists between the claim and the agreement containing the arbitration clause, regardless of the legal label attached to the dispute. Seifert, 750 So.2d at 637-38.
In Seifert, the plaintiff brought a wrongful death action against her house builder. She and her husband had contracted with the builder to construct a new house. After the Seiferts moved into the house, the husband left his car running in the garage. The air conditioning system, which was located in the garage, picked up the carbon monoxide emissions from the car and distributed them through the house, killing the husband. The wife, as personal representative of her husband's estate, sued the builder for negligence. The builder moved to submit the wrongful death action to arbitration, based on an arbitration clause in the purchase and sale contract providing for arbitration of "any controversy or claim arising under or related to this agreement or to the property." 750 So.2d at 635. The issue in Seifert was whether these arbitration terms in the purchase and sale contract required the wrongful death claim to be arbitrated.
The Fifth District Court of Appeal held that the issue was arbitrable because the claims arose under or related to the contract for construction of the home. U.S. Home Corp. v. Seifert, 699 So.2d 787 (Fla. 5th DCA 1997). However, the Florida Supreme Court quashed the decision, noting that "even in contracts containing broad arbitration provisions, the determination of whether a particular claim must be submitted to arbitration necessarily depends on the existence of some nexus between the dispute and the contract containing the arbitration clause." Seifert, 750 So.2d at 638. The supreme court disagreed that an agreement to arbitrate in a purchase and sale agreement necessarily requires "arbitration of a subsequent and independent tort action based upon common law duties." Id. at 635. It further noted that "the mere fact that the dispute would not have arisen but for the existence of the contract and consequent relationship between the parties is insufficient by itself to transform a dispute into one 'arising out of or relating to' the agreement." Id. at 638.
After reviewing case law from Florida and other jurisdictions and comparing how various courts interpret arbitration clauses that include all claims or controversies "arising out of" the subject contract, the supreme court ultimately adopted the reasoning employed in our holding in Terminix International Co., L.P. v. Michaels, 668 So.2d 1013 (Fla. 4th DCA 1996). There, we relied upon and adopted the Arizona Court of Appeal's holding in Dusold v. Porta-John Corp., 167 Ariz. 358, 807 P.2d 526 (Ct.App.1990). The supreme court in Seifert quoted Dusold :
If the contract places the parties in a unique relationship that creates new *1020 duties not otherwise imposed by law, then a dispute regarding a breach of a contractually-imposed duty is one that arises from the contract. (citation omitted). Analogously, such a claim would be one arising from the contract terms and therefore subject to arbitration where the contract required it. If, on the other hand, the duty alleged to be breached is one imposed by law in recognition of public policy and is generally owed to others besides the contracting parties, then a dispute regarding such a breach is not one arising from the contract, but sounds in tort. Therefore, a contractually-imposed arbitration requirement ... would not apply to such a claim.
Seifert, at 639 (quoting Dusold, 807 P.2d at 529-31).
As mentioned above, this case involves tort claims based on King Motor's alleged breach of duty to keep customers' confidential and financial information safe. These claims do not implicate contractual duties created or governed by the contract but concern duties generally owed to the public, i.e., to others besides appellee Jones. None of the allegations in the complaint require reference to or construction of any portion of the purchase and sale or financing agreement between the parties. Because this action is predicated upon a theory of negligence unrelated to the rights and obligations of the contract, it does not have a sufficient relationship to the agreement as to fall within the arbitration provision. Accordingly, we affirm the trial court's denial of the stay and motion to compel arbitration.

STEVENSON and MAY, JJ., concur.
Fla.App. 4 Dist.,2005.
King Motor Co. of Fort Lauderdale v. Jones
901 So.2d 1017, 30 Fla. L. Weekly D1262

David A. Szwak

No Arb Allowed: Rocha

Postby David A. Szwak » Mon Dec 19, 2005 7:47 pm

Not Reported in Cal.Rptr.3d, 2005 WL 3219728 (Cal.App. 5 Dist.)
Not Officially Published
(Cal. Rules of Court, Rules 976, 977)

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

Court of Appeal, Fifth District, California.
Sally ROCHA, Plaintiff and Respondent,
CENTRAL VALLEY RV OUTLET, INC., Defendant and Appellant.
Sally Rocha, Cross-complainant and Respondent,
Central Valley RV Outlet, Inc., Cross-defendant and Appellant.
Nos. F046584, F046586.
(Super.Ct.Nos. 04CECG01627, 03CECG02002).
Dec. 1, 2005.

APPEAL from a judgment of the Superior Court of Fresno County. Donald S. Black and Alan Simpson, Judges.


*1 Sally and Ted Rocha [FN1] executed a purchase agreement with Central Valley RV Outlet, Inc. (Central Valley) to purchase a used travel trailer on credit. Central Valley assigned the loan to Bank of America (the Bank), but the Rochas made only one payment. The Bank repossessed the trailer and filed a lawsuit against the Rochas for breach of contract and recovery of the balance and interest due.

FN1. We refer to Sally and Ted Rocha by their first names hereafter not out of disrespect but to ease the reader's task.

Ted died, and Sally filed a complaint and cross-complaint against the Bank and Central Valley, alleging they were fraudulently induced to enter into the purchase agreement, and their signatures on the credit application were forged. Sally also named their adult grandson as a defendant, and alleged the grandson arranged for the transaction with Central Valley as part of his scheme to commit elder abuse and identity fraud against them.
Central Valley filed motions to compel arbitration of Sally's complaint and cross-complaint based on an arbitration agreement allegedly signed by the Rochas when they entered into the purchase agreement. Sally opposed the motions and alleged their signatures on the arbitration agreement were forgeries and they never signed it. She also alleged the arbitration agreement was unenforceable because it was procedurally and substantively unconscionable.
The two separate actions derived from Sally's complaint and cross-complaint were not consolidated, and two separate judicial proceedings were conducted on Central Valley's motions to compel arbitration. In both cases, the trial courts found the arbitration agreement was invalid because Central Valley failed to establish the validity of Sally's signature and, in the alternative, the arbitration agreement was procedurally and substantively unconscionable.
The instant case involves two separate proceedings derived from Sally's complaint and cross-complaint against Central Valley, and Central Valley's two separate appeals from those proceedings. The parties filed separate appellate records and appellate briefs here, which are virtually identical. We consolidated the two appeals after briefing was completed.
Central Valley contends the trial courts should have conducted evidentiary hearings to resolve Sally's forgery allegations, and the arbitration agreement was not unconscionable. Sally argues (1) the trial courts' findings are supported by substantial evidence; (2) the arbitration agreement was invalid because Central Valley failed to prove she signed the agreement; and (3) the terms were unconscionable. The parties filed several motions here for judicial notice, to take additional evidence, to dismiss the appeals, and for sanctions.
The issues raised in these two appeals are thus identical: (1) whether both trial courts properly found that Central Valley failed to establish the existence of an arbitration agreement; (2) whether the trial court should have conducted an evidentiary hearing on Sally's allegations of forgery; (3) whether the arbitration agreement was invalid because of procedural and substantive unconscionability; and (4) whether we should grant the relief requested in various motions pending before us.
*2 We decline to reach the forgery issue, however, and affirm the trial courts' orders by concluding Central Valley's arbitration agreement is procedurally and substantively unconscionable even if Sally signed the arbitration agreement. We are not deciding any issue regarding whether or not Sally signed any documents.


FN2. No evidentiary hearings were held in this case. As a result, the facts are taken from the various declarations and exhibits filed in support of the pleadings, primarily Sally's declarations about the facts and circumstances of the disputed transaction.

The Rochas
Sally and Ted were married and lived in Fresno County. According to Sally, Ted (born 1923) had fourth grade reading skills and "could barely read a children's book. He could not write much beyond his name." Ted had been employed with the railroad. Sally worked as an attendant at Hope Manor.
Ted had a cervical laminectomy in 1998. After this surgery, Ted suffered from various mental and physical illnesses. He had several strokes, which caused him to be confused and weak. His eyesight and hearing grew worse. He needed a walker and then a cane. He suffered multiple strokes, weakness, and slurred speech from probable transient ischemic attacks.
In 1999, Sally (born 1927) quit her job based on their physician's advice that Ted could not be left alone. Ted understood "only bits and pieces of what he heard. He suffered extreme weight loss in 2001 and his reasoning ability progressively got worse. From my watching him, he had lost all ability to read in 2000." In 2002 and 2003, Ted went through various physical and cognitive tests that indicated he was illiterate and unable to do the math and spelling portions of the tests, he suffered from widespread and severe cognitive deficits, he was not oriented to time or place, and his ability to learn and recall any new information was devastated.
In the summer of 2000, Joe Navarro, the Rochas' grandson, "prevailed" upon Ted to purchase a mobile home and park it near a mobile home that Navarro lived in. Thereafter, Ted lived in his own mobile home for several days at a time, and also still lived with Sally in their Fresno residence.
The Purchase Agreement
On approximately June 1, 2001, Navarro arrived at Sally's Fresno residence at night with a salesman from Central Valley. They asked her to sign a contract to purchase a travel trailer to replace the mobile home that Ted had purchased in the summer of 2000. Sally declared:
"[Joe and the salesman] would not leave my home until I signed the contract. I told them that Ted and I could not afford to make the monthly payments on the RV, which were about twice as much as the mobile home Ted already had.... He said that our creditworthiness would be verified and that the contract would be cancelled if Ted and I did not qualify. Based on those statements, I signed the contract in order to get them to leave my house and leave me alone, and in the belief that the contract would be cancelled."
Sally further declared:
"On approximately the next day, I was told that the contract needed to be signed again at the Central Valley dealership. Ted and I met with a manager there who again stated that the contract would not remain in effect if our creditworthiness was not verified. I again told him that we could not afford the payments. Based on his assurance that the contract would be cancelled, I signed it again ... expecting that once a bank looked at our ability to pay, the contract would be cancelled. Ted and I were never asked to provide copies of check stubs or other documentation of our actual income."
*3 At the time, Ted received about $895 per month from his railroad retirement, and Sally received $565 per month from Social Security.
The purchase agreement was a preprinted form, apparently prepared by Central Valley, for the purchase of a used 1998 Alfa Gold travel trailer. This form has various purchase details typed in. The total contract price was $49,715.30, and the Rochas agreed to monthly payments of $567.34 from July 2001 to June 2016. The purchase agreement states the Rochas made a down payment of $9,857, and also traded in a 2001 Wildwood mobile home, with a value of $35,500. The purchase was financed with an annual percentage rate of 10.99 percent, so that the total cost of the purchase on credit would be $111,978.20. The agreement contains signatures of Ted and Sally, executed on June 2, 2001, and their signatures and initials are on various places throughout the document. The date, however, was typed in and not written in. The Rochas signed the waiver of disability insurance, and the purchase agreement states that Ted was 78 years old and Sally was 73 years old.
The Credit Application
Sometime before February 2002, Sally learned Navarro was either "using Ted's name or unduly influencing Ted to buy things that Joe wanted." Sally also learned that Navarro had Ted sign, or falsified Ted's signature, on an installment contract in 2000 for the purchase of a car for Navarro's wife and a pickup truck for Navarro. "Joe incurred many other debts in Ted's name at Circuit City, Pep Boys, Best Buy and elsewhere."
"Ted told me that Joe had said to him in substance, 'You don't have to read it Grandpa, you just need to sign it. Its [sic ] no big deal.' I have heard Joe boast that he could make Ted do whatever Joe wanted."
At some point around February 2002, Sally was "shocked" to learn the Bank extended credit for the purchase of the Alpha Gold travel trailer from Central Valley. At that time, a friend of Sally's obtained a copy of the credit application that the Rochas allegedly executed for the purchase of the travel trailer. Sally reviewed the credit application and realized her signature was a forgery. Sally was familiar with Ted's signature and it also was a forgery. The credit application had other false information, including that Sally had a monthly income of $2,960 and Ted had a monthly income of $2,890.
After Sally reviewed the credit application, she contacted the Fresno Police Department and reported their grandson was abusing Ted and stealing their identities. Detective Ronnie Pack and another officer met with the Rochas and advised them to send a letter to creditors informing them of the alleged elder abuse and identity theft, and that a criminal case was being opened. According to Sally, Detective Pack believed their signatures on the credit application were forgeries and they were the victims of identity theft and elder abuse.
In approximately May 2002, Sally sent a handwritten letter to the Bank by facsimile and declared Ted was not responsible for any debts incurred by Navarro, criminal charges were going to be filed against Navarro for elder abuse and identity theft, and a criminal case number had been assigned to the investigation.
The Bank's Complaint and Default Judgment
*4 On June 9, 2003, the Bank filed a complaint in the Superior Court of Fresno County (case No. 03CECG02002) against Ted and Sally. The complaint alleged the Rochas entered into a "motor vehicle contract and security agreement," on or about June 2, 2001, for the purchase of a 1998 Alfa Gold motor home from Central Valley, the Bank's assignor. The principal amount of the contract was for $49,715.30. The complaint alleged the Rochas agreed to make monthly payments of $567.34, for 179 months, beginning on July 17, 2001, with the final payment on June 17, 2016, but they last made a payment on or about June 17, 2001, and failed to make any other payments. The Bank further alleged it notified the Rochas that the unpaid balance was due and payable and they failed to make any further payments. The Bank took possession of the vehicle, notified the Rochas of their right to redemption, the Rochas failed to respond, and the Bank sold the vehicle. The total balance due and payable on the vehicle was $27,232.17.
The Bank alleged causes of action for breach of contract, money had and received, account stated, and an open book account, and prayed for the principal amount due plus interest, reasonable attorney's fees as provided in the purchase agreement, and costs of suit.
The Bank filed several exhibits in support of the complaint, including a copy of the "motor vehicle contract and security agreement" between the Rochas and Central Valley. The Bank did not attach a copy of the credit application or any type of arbitration agreement.
In June 2003, the Rochas were served with the Bank's complaint but failed to respond to the Bank's suit. On July 30, 2003, the Bank requested the trial court to enter a default against the Rochas. On August 4, 2003, the trial court granted the Bank's request for a default judgment against the Rochas for $37,748.97.
On November 26, 2003, Ted Rocha died.
On December 5, 2003, the Bank requested entry of the default judgment against the Rochas. On December 11, 2003, the trial court entered the default judgment in favor of the Bank and against the Rochas. The Bank apparently did not realize that Ted had died. As a result of the default judgment, the abstract of judgment was recorded and the judgment became a lien on Sally's real property.
In March 2004, attorney Daniel O. Jamison agreed to represent Sally. On May 11, 2004, Sally filed a motion for relief from the default judgment. On June 15, 2004, the trial court granted the Rochas' motion for relief from the default.
Sally's Answer and Cross-complaint
On June 17, 2004, Sally filed an answer to the Bank's lawsuit, denied the Bank's allegations, and raised various affirmative defenses. Also on June 17, 2004, Sally filed a cross-complaint against the Bank, Central Valley, and Navarro (case No. 03CECG02002) containing many of the same allegations set forth in the answer and several more. The cross-complaint alleged the following causes of action against the defendants: fraud, breach of contract, identity theft, intentional infliction of emotional distress, financial elder abuse, common law invasion of privacy, conversion, indemnity, and illegal service of Ted.
*5 The Bank filed an answer to Sally's cross-complaint, denied the allegations, and raised several affirmative defenses. The Bank did not claim that the parties agreed to submit any disputes to arbitration.
Sally's Complaint Against the Defendants
Sally also filed a separate complaint (case No. 04CECG01627) against the Bank, Central Valley, and Navarro on June 1, 2004, alleging virtually the same causes of action as in the cross-complaint. Sally filed this separate lawsuit to preserve various causes of action under the statute of limitations, in case she was unable to obtain relief from the default judgment.
On September 24, 2004, Sally moved to consolidate her complaint and cross-complaint against the Bank and Central Valley because they presented common issues of fact and law. On October 28, 2004, the trial court denied the motion to consolidate. Thereafter, all motions, pleadings, and hearings on Sally's complaint and cross-complaint were conducted separately before different judges.
Central Valley's Motion to Compel Arbitration
On August 20, 2004, Central Valley filed separate but identical motions to compel arbitration as to all issues raised in Sally's complaint (case No. 04CECG01627) and cross-complaint (case No. 03CECG02002), and requested the trial courts to stay all proceedings pending resolution of the arbitration.
In both motions, Central Valley argued the arbitration agreement was valid as to Sally and did not address any issues as to Ted, since he had died and was no longer a party to the litigation. Central Valley alleged that Sally executed the purchase agreement and arbitration agreement as part of the transaction to purchase the travel trailer. This agreement required "the parties to arbitrate all claims and controversies arising out of the Purchase Agreement." Central Valley asserted Sally was bound by the arbitration agreement, and all issues raised in the cross-complaint should be submitted to arbitration.
Central Valley submitted a copy of the arbitration agreement as an exhibit to its motion to compel. The arbitration agreement is a preprinted form on a single page, entirely separate and apart from either the purchase agreement or the credit application. It consists of two paragraphs and has the following title:

"Central Valley RV Outlet, Inc."
"Arbitration Addendum"
The first paragraph has spaces for names and dates as follows:
"We the undersigned do hereby agree to the following modification of the Retail Installment Contract and Security Agreement ('Contract') entered into on [__________] between [_______________] ('Buyer') and [________________] ('Seller') for the purchase of a [_______________] (year, model and make), serial number (if applicable) [_______________]."
The following interlineations had been handwritten into the blank spaces in this paragraph: that it was entered into on "June 2nd, 2001" between "Ted Y & Sally Rocha" as buyer and "Central Valley RV Outlet, Inc.," as seller, for the purchase of a "1998 Alfa Gold" with its serial number.
*6 The terms of the Arbitration Addendum are contained in the lengthy second paragraph: that the parties agreed for all disputes arising from the contract to be resolved by binding arbitration, the agreement was governed by the Federal Arbitration Act, the parties understood they had a right to litigate disputes in court but preferred to resolve disputes through arbitration "except as provided herein," and the parties waived any right to a jury trial. The agreement also provides for the buyers to waive their right to join a class action against Central Valley. In the final portion of the paragraph, Central Valley retains for itself the ability to file a lawsuit against the buyers:
"Notwithstanding anything hereunto the contrary, we retain an option to use judicial or non-judicial relief to enforce a security agreement relating to the property or to foreclosure on the property. Such judicial relief would take the form of a lawsuit. The institution and maintainance [sic ] of any action for judicial relief in a court to foreclose upon any property, to obtain a monetary judgement or to enforce the Contract and this Agreement shall not constitute a waiver of the right of any party to compel arbitratoin [sic ] regarding any other dispute or remedy subject to arbitration in this Agreement, including the filing of a counterclaim in a suit brought to us pursuant to this provision." (Italics added.) At the bottom of the page, there are handwritten signatures from "Ted Y. Rocha" as "Buyer" and "Sally Rocha" as "Co-Buyer," with the handwritten date of "6-2, 2001." There are handwritten initials below the Rochas' signatures from someone apparently acting on behalf of Central Valley as the seller, also dated June 2, 2001. It is unclear whose initials are written at the bottom of the page.
Sally's Opposition to Motion for Arbitration
On September 17, 2004, Sally filed oppositions to Central Valley's motions to compel arbitration in the separate actions for the complaint and cross-complaint. Sally filed a supportive declaration, which is virtually identical to her previous declarations in this case. Sally's declaration again addressed Ted's limited education and health problems, his poor physical and mental condition, their grandson's alleged conduct, her account of the circumstances surrounding the purchase of the travel trailer, the salesman's representations, why she signed the purchase agreement, that their signatures were forged on the credit application, that Sally contacted the police and reported her allegations of elder abuse and identity theft, and that she notified the Bank and other creditors about the situation.
Sally also declared that she reviewed the Arbitration Addendum produced by Central Valley; she had never seen this document and their signatures were forged:
"I did not sign the original of that document and the signature shown for me on the copy of that document is not my signature and is a forgery. Ted also did not sign the original of that document and the signature shown for him on the copy of that document is not Ted's signature and is a forgery. I was present at the time that Ted and I signed the original [of the purchase agreement] and until we left Central Valley. Central Valley gave to me only a yellow 'Customer Copy' of the original of [the purchase agreement]. There was nothing attached to it as an addendum of any kind. I also was not provided with a copy of any document entitled, 'Credit Application.' I was with Ted before and when we finished at the Central Valley RV Outlet, Inc., dealership that day. I did not see him receive a copy of [the arbitration addendum] or any other document described as an addendum, I did not see him receive a copy of a 'Credit Application,' and he never gave me any such documents." (Italics added.)
*7 Sally's opposition asserted that Central Valley failed to meet its burden of proving the existence of the arbitration agreement, the Rochas never signed the arbitration agreement, and Central Valley failed to present evidence of anyone with personal knowledge who witnessed the Rochas' signatures.
In the alternative, Sally argued the terms of the arbitration agreement were substantively unconscionable because they allowed Central Valley to file a lawsuit to enforce the security agreement but limited Sally's remedy to arbitration. Sally noted that other courts had found identical unilateral arbitration terms to be substantively unconscionable. In addition, the circumstances of the arbitration agreement gave rise to procedural unconscionability because the Rochas were highly vulnerable, they relied upon the salesperson's misrepresentations when they executed the purchase agreement, and their signatures were forged on the credit application.
Central Valley's Reply to Sally's Opposition
On September 23, 2004, Central Valley filed replies to Sally's oppositions to compel arbitration of the complaint and cross-complaint, supported by a series of declarations. Central Valley submitted two declarations from John R. Brewer III, who was Central Valley's chief executive officer but had been the finance manager in June 2001, and he dealt with the Rochas in that capacity. Brewer declared that Ted was at Central Valley's dealership on June 2, 2001, inspected several recreational vehicles, and decided to purchase the used 1998 Alpha Gold travel trailer and trade in the 2001 Wildwood travel trailer because the Wildwood was "a much smaller unit, and did not have the expanded amenities" of the 1998 Alpha Gold. Brewer further declared:
"3. After the purchase price, and trade-in value, were negotiated with Mr. Rocha, I received the purchase terms and a completed credit application signed by Mr. Rocha. I prepared the Purchase Agreement and various other documents in connection with the purchase of the vehicle. I presented the documents to Mr. Rocha, one at a time, to allow his review and inspection of the documents, at which time he signed the documents. Among the documents signed by Mr. Rocha was the Purchase Contract, Authorization for Payoff, Agreement to Furnish Insurance, RV Shield Service Contract, DMV Report of Sale and an Arbitration Addendum. True and correct copies of which are attached hereto.... Mr. Rocha signed the documents in my presence and I witnessed him sign each of the documents personally.
"4. Sally Rocha was not present at the dealership on June 2, 2001. However, Ted Rocha had contacted her by telephone to obtain her consent to purchase the Alpha Gold, and to trade-in the Wildwood. Because of the lateness of the hour, Sally Rocha requested that the purchase documents be brought to her, rather than coming to the dealership that evening. The salesman, Mario Bautista, consented to take the documents for Ms. Rocha's signature at her house. I gathered the documents which had been signed by Ted Rocha and gave them to Mario Bautista to take with him for Sally Rocha to sign.
*8 "5. The following day, Mr. Bautista returned the documents to the dealership. As I reviewed the documents, I found that Ms. Rocha had inadvertently neglected to sign some of the sub-sections on the Purchase Contract. I contacted Ms. Rocha and explained that she had missed signing a couple of places on the Purchase Contract and asked if she could come into the dealership to sign. She said that she would be in. Thereafter, Ms. Rocha came in and signed those places on the purchase contract which she had missed." (Italics added.)
In his second declaration, Brewer addressed Sally's allegations that Central Valley's salesperson made various statements about whether their credit would be approved:
"2. Central Valley RV does not evaluate the credit of customers for purposes of lending institution approval. In the present case, the Credit Application of Ted and Sally Rocha was provided to Bank of America for their independent review and approval or rejection of the application. Central Valley RV had no part in Bank of America's approval of financing for the present action. In fact, Central Valley RV is not in the business of financing recreational vehicles, and would not have sold the recreational vehicle without financing through an independent lending source."
Central Valley also submitted a declaration from Bautista, who declared he was the salesman who handled the Rochas' purchase of the trailer. Bautista declared:
"3. Prior to June 2, 2001, I had been working with Ted Rocha to purchase a bigger travel trailer to replace a smaller and less equipped travel trailer which he intended to trade.
"4. In connection with the purchase of the Alpha Gold Travel Trailer, I took a credit application from Mr. Rocha. That is, in completing the credit application, I asked Mr. Rocha for various information which I wrote on to the credit application in his presence. After completion of the credit application, based on the information he provided to me, he signed the credit application.
"5. After we completed the negotiation for the purchase of the Alpha Gold, and the trade-in of his travel trailer, I escorted Mr. Rocha to the Finance Manager, John R. Brewer, III, to document the purchase and trade-in of the travel trailer.
"6. After Ted Rocha met with the Finance Manager, I was asked if I would take the document to Sally Rocha's home to obtain her signatures on the purchase documents.
"7. When I arrived at Ms. Rocha's home, I presented the documents to Ms. Rocha for her to sign in my presence. The documents included the Purchase Contract, Agreement to Furnish Insurance, DMV Report of Sale, the Credit Application, and the Arbitration Addendum, true and correct copies of which are attached hereto....
"8. The following morning I returned to work at Central Valley RV and delivered the purchase documents to the Finance Manager. After his review, I was informed that Sally Rocha had missed one or two places on the Purchase Contract. I normally am not involved in the Purchase Contract documentation, and both Ms. Rocha and I failed to realize her signature was required at those places on the Contract.
*9 "9. Later that day, I saw Ms. Rocha when she returned to the dealership to further sign the document." (Italics added.)
Based on these declarations, Central Valley argued that it had carried its burden, and the declarations of Brewer and Bautista established their "personal knowledge of the authenticity of the documents and the signatures of Ted and Sally Rocha" on the arbitration agreement. In the alternative, Central Valley requested the trial court to conduct an evidentiary hearing to resolve any disputed factual issues about the signatures.
The Hearings on the Motions to Compel
Judge Black presided over the motion to compel arbitration on Sally's complaint, and Judge Simpson presided over the motion to compel arbitration on Sally's cross-complaint. Both trial courts issued tentative rulings that denied Central Valley's motions to compel. Thereafter, the trial courts conducted separate hearings and heard arguments on both motions on September 28, 2004, and then adopted their tentative rulings in favor of Sally. We will discuss separately these two hearings and the trial courts' separate opinions.
The Trial Court's Ruling on the Complaint
On September 27, 2004, Judge Black issued his tentative ruling denying Central Valley's motion. In the tentative ruling, the trial court found Central Valley had not rebutted Sally's showing the agreement was false.
The trial court also found that even if the signatures were valid, the arbitration agreement still was unenforceable because there were aspects of both procedural and substantive unconscionability. Procedurally, the agreement was an adhesion contract drafted by Central Valley as a form contract. There was no evidence Sally was given any opportunity to negotiate the terms, as it was "apparently" presented as a "take it or leave it proposition," and she had no choice but to agree to the terms or refuse to enter into the sales agreement at all. Sally and Ted were elderly, and Ted had a fourth grade education and suffered from serious health and mental problems. Moreover, Central Valley first obtained Sally's signature on the sales contract at night, and the addendum as well, or, maybe, the next day at the dealership.
"The circumstances thus tend to reinforce the impression of inequality between the parties. Consequently, the arbitration agreement was a contract of adhesion. The existence of a contract of adhesion is sufficient to satisfy the element of procedural unconscionability."
The trial court found the terms were substantively unconscionable because the agreement lacked mutuality.
"While the agreement requires the parties to arbitrate all disputes arising out of the sale of the trailer, it also reserves to [Central Valley] the right to bring certain claims against [Sally] and her husband outside of the arbitration process. In particular, the dealership was not required to arbitrate if it wanted to enforce the security agreement or foreclose on [Sally's] property. In addition, the agreement implies that Central Valley could bring an action 'to obtain a monetary judgment or to enforce the Contract' without waiving its right to compel arbitration of other disputes arising out of the agreement. In essence, then, the arbitration agreement purports to be entirely binding upon [the Rochas], while giving the dealership to opt out of arbitration under most circumstances. Therefore, the agreement clearly lacked mutuality."
*10 Central Valley failed to provide any reasonable business explanation for the lack of mutuality, or even admit the absence of mutuality. "Thus, [Central Valley] apparently concedes that there is no legitimate business reason for the agreement's lack of mutuality. Therefore, the arbitration agreement is substantively unconscionable as well."
Judge Black conducted a hearing on Central Valley's motion on the complaint on the afternoon of September 28, 2004. The trial court adopted the tentative ruling and denied Central Valley's motion to compel arbitration.
The Trial Court's Ruling on the Cross-complaint
On September 24, 2004, Judge Simpson issued his tentative ruling on Central Valley's motion finding Central Valley failed to demonstrate the existence of a valid arbitration agreement. Judge Simpson also found that even if the signatures were valid, the arbitration agreement was both procedurally and substantively unconscionable.
Central Valley argued the arbitration agreement was not unconscionable because Sally never alleged she was denied the opportunity to negotiate, that she had no other place to buy the trailer, or she was forced to sign the agreement. Central Valley objected to the tentative opinion's findings about the lack of mutuality in the arbitration terms based on Central Valley's retention of the right to file a lawsuit on the security agreement:
"[I]f there are, for example, a right of Central Valley RV to sue on the contract, the contract was not to be in existence if it couldn't be assigned to the bank, so there was no ability of Central Valley RV to ever foreclose on the contract. [¶] For that reason, your Honor, those terms are irrelevant and inapplicable to Central Valley RV, and since they are irrelevant and inapplicable, they certainly can be severed because they don't go to what the bargain between Central Valley RV and Mrs. Rocha related to."
Judge Simpson adopted the tentative ruling and denied Central Valley's motion.

Standard of Review
We first must resolve the applicable burden of proof and standard of review in this case before we reach the underlying issues. Central Valley asserts this court must conduct a "de novo" review of the trial court's findings. Sally Rocha argues the abuse of discretion standard is applicable to the trial court's ruling, and any express or implied factual findings must be affirmed if supported by substantial evidence.
General principles of contract law determine whether the parties have entered into a binding agreement to arbitrate. (Craig v. Brown & Root, Inc. (2000) 84 Cal.App.4th 416, 420.) "A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract." (Code Civ. Proc., § 1281.)
In considering a petition to compel arbitration, "the superior court does not decide whether the plaintiff's causes of action have merit, although some factual questions considered in deciding the application may overlap those raised by the plaintiff's claims for relief. The only question implicated by the petition to compel arbitration is whether the arbitration agreements should be specifically enforced." (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 412 (Rosenthal ).)
*11 A party opposing arbitration must prove by a preponderance of the evidence any defense to arbitration. Before denying a petition to compel arbitration, the trial court must determine whether the party opposing arbitration has proven its defense. It is error for a trial court to deny a petition to compel merely on the ground that the party opposing arbitration has presented legally sufficient evidence of its defense. (Rosenthal, supra, 14 Cal.4th at pp. 413-415.)
A petition to compel arbitration is routinely decided on the basis of affidavits, without the benefit of live testimony. (§ 2009; Beckett v. Kaynar Mfg. Co., Inc. (1958) 49 Cal.2d 695, 698; Reifler v. Superior Court (1974) 39 Cal.App.3d 479, 483.) The trial court may consider evidence on factual issues relating to the threshold issue of arbitrability, i.e., whether, under the facts before the trial court, the contract excludes the dispute from its arbitration clause or includes the issue within that clause, and parties may submit declarations when factual issues are tendered. (Engineers & Architects Assn. v. Community Development Dept. (1994) 30 Cal.App.4th 644, 653 (Engineers & Architects Assn.).)
While a petition to compel arbitration is a law and motion matter, an order denying the petition is immediately appealable. (Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th 846, 849, fn. 1 (Flores ).) We conduct a de novo review of the trial court's decision on a motion to compel arbitration when extrinsic evidence is not at issue or is undisputed. (Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 174 (Mercuro ); Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th 1159, 1164 (Crippen ); Stirlen v. Supercuts, Inc. (1997) 51 Cal.App .4th 1519, 1527 (Stirlen ); Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094, 1099 (Szetela ).)
In contrast, when the existence and validity of an arbitration agreement turns upon the consideration of conflicting extrinsic evidence, the standard on appeal is whether there is substantial evidence to support the trial court's express and implied factual findings. (Stirlen, supra, 51 Cal.App.4th at p. 1527, fn. 2.) The substantial evidence test is equally applicable " 'whether the evidence is oral or documentary. In the consideration of an order made on affidavits involving the decision of a question of fact, the appellate court is bound by the same rule as where oral testimony is presented for review.' [Citations.]" (Griffith Co. v. San Diego Col. for Women (1955) 45 Cal.2d 501, 508.) In such a situation, we must imply factual findings in support of the trial court's ruling and accept its implied determinations of credibility if supported by substantial evidence. (Engineers & Architects Assn., supra, 30 Cal.App.4th at p. 653.)
Here the trial court was faced with conflicting extrinsic evidence based on declarations from Sally and Central Valley's employees as the basic facts and circumstances surrounding the underlying transaction. Our review of the trial court's resolution of the disputed factual questions posed by the conflicting declarations is subject to the substantial evidence rule. This court, however, must conduct a de novo review of the trial court's findings as to the specific terms of the arbitration agreement. We will undertake this task as to the trial court's findings of procedural and substantive unconscionability, but not as to the validity of Sally's signature.

*12 Central Valley contends both Judge Black and Judge Simpson improperly found the arbitration agreement was invalid because it was procedurally and substantively unconscionable. Sally asserts the terms of the arbitration clause are substantively unconscionable. Sally further argues the facts and circumstances surrounding the transaction in this case--as set forth in her declarations--establish sufficient evidence to find procedural unconscionability.
A. Procedural and S ubstantive U nconscionability
We begin with the basic principles as to unconscionability as a defense to a motion to compel arbitration. "As is true for any contract, an arbitration provision may be held unenforceable if it is unconscionable. [Citations.]" (Flores, supra, 93 Cal.App.4th at p. 851, fn. omitted.) " '[U]nconscionability has generally been recognized to include 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.' [Citation.]" (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486.) And as this court observed in Crippen, supra, 124 Cal.App.4th 1159, "It is now blackletter law that a motion to compel arbitration must be denied if the arbitration agreement is both procedurally and substantively unconscionable." (Id. at p. 1162.)
The doctrine of unconscionability has a procedural and a substantive element. "Both elements must appear in order to invalidate a contract or one of its individual terms." (Mercuro, supra, 96 Cal.App.4th at p. 174.)
" '[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.]" (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 (Armendariz ).)
Stated another way, "[s]ubstantive unconscionability focuses on the actual terms of the agreement, while procedural unconscionability focuses on the manner in which the contract was negotiated and the circumstances of the parties." (American Software, Inc. v. Ali (1996) 46 Cal.App.4th 1386, 1390.)
"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 reject it.' [Citation.]" (Armendariz, supra, 24 Cal.4th at p. 113.) "A finding of a contract of adhesion is essentially a finding of procedural unconscionability. [Citation.]" (Flores, supra, 93 Cal.App.4th at p. 853.)
" 'Procedural unconscionability' concerns the manner in which the contract was negotiated and the circumstances of the parties at that time. [Citation.] It focuses on factors of oppression and surprise. [Citation.] The oppression component arises from an inequality of bargaining power of the parties to the contract and an absence of real negotiation or a meaningful choice on the part of the weaker party. [Citations.]" (Kinney v. United HealthCare Services, Inc. (1999) 70 Cal.App.4th 1322, 1329 (Kinney ).) "The second component of procedural unconscionability encompasses an aspect of surprise, with the terms to which the party supposedly agreed being hidden in a prolix printed form drafted by the party seeking to enforce them. [Citations.]" (Id. at pp. 1329-1330.)
*13 "Procedural unconscionability turns on adhesiveness--a set of circumstances in which the weaker or 'adhering' party is presented a contract drafted by the stronger party on a take it or leave it basis. To put it another way, procedural unconscionability focuses on the oppressiveness of the stronger party's conduct." (Mercuro, supra, 96 Cal.App.4th at p. 174, fns. omitted, quoting Armendariz, supra, 24 Cal.4th at pp. 113, 114.)
A contract of adhesion thus exists when a party of superior bargaining strength imposes a standardized contract on the other party on a take-it-or-leave-it basis. (Armendariz, supra, 24 Cal.4th at p. 113.)
In contrast, "substantive unconscionability focuses on the one-sidedness of the contract terms. In the context of an arbitration agreement, the agreement is unconscionable unless there is a ' "modicum of bilaterality" ' in the arbitration remedy. [Citations.] 'Although parties are free to contract for asymmetrical remedies and arbitration clauses of varying scope, ... the doctrine of unconscionability 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.' " (Flores, supra, 93 Cal.App.4th at p. 854, quoting Armendariz, supra, 24 Cal.4th at p. 118.)
Even if the terms of an arbitration agreement are substantively unconscionable, such terms still may be valid if the stronger party has a reasonable justification for the provision. A contract can provide a " 'margin of safety' that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable. [Citation.]" (Armendariz, supra, 24 Cal.4th at p. 117, quoting Stirlen, supra, 51 Cal.App.4th at p. 1536.) If the drafting party has a "reasonable justification for the arrangement--i.e., a justification grounded in something other than the [party's] desire to maximize its advantage based on the perceived superiority of the judicial forum--such an agreement would not be unconscionable. Without such justification, we must assume that it is." (Armendariz, supra, 24 Cal.4th at p. 120.) "[U]nless the 'business realities' that create the special need for such an advantage are explained in the contract itself, ... it must be factually established." (Stirlen, supra, 51 Cal.App.4th at p. 1536.) Thus, the moving party must present evidence to factually establish a business reality to justify the one-sided nature of an arbitration agreement. (Armendariz, supra, 24 Cal.4th at p. 117.)
The party seeking to compel arbitration bears the burden of proving by a preponderance of the evidence that an arbitration agreement exists. The opposing party then must prove any defense to the enforcement of the arbitration agreement by the preponderance of the evidence. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972 (Engalla ); Crippen, supra, 124 Cal.App.4th at p. 1164.) Where a plaintiff asserts that an arbitration agreement is not enforceable because of the defense of unconscionability, the plaintiff has the burden of proving both procedural and substantive unconscionability. (Crippen, supra, 15 Cal.App.4th at pp. 1164- 1165.) "The greater the evidence there was of one of these, the less was required of the other." (Id. at p. 1165.)
*14 " '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 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, supra, 24 Cal.4th at p. 114.)
Thus, the elements of substantive and procedural unconscionability "are reviewed in tandem such that 'the greater the degree of substantive unconscionability, the less the degree of procedural unconscionability that is required to annul the contract or clause.' [Citation.]" (Kinney, supra, 70 Cal.App.4th at p. 1329.)
"Unconscionability is determined as of the time the contract is made. (Civ.Code, § 1670.5.)" (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 91 (Gutierrez ).) Unconscionability is ultimately a question of law for the trial court. Numerous factors may bear on the question of unconscionability, however, such as the business conditions under which the contract was formed. (Flores, supra, 93 Cal.App.4th at p. 851.) "Where the trial court's determination of unconscionability is based upon the trial court's resolution of conflicts in the evidence, or on the factual inferences which may be drawn therefrom, we consider the evidence in the light most favorable to the court's determination and review those aspects of the determination for substantial evidence." (Gutierrez, supra, 114 Cal.App.4th at p. 89.)
Finally, an arbitration agreement containing unconscionable provisions still may be enforced if those provisions can be severed from the agreement. (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1075.) When an agreement lacks mutuality, however, "such permeation is indicated by the fact that there is no single provision a court can strike or restrict in order to remove the unconscionable taint from the agreement. Rather, the court would have to, in effect, reform the contract, not through severance or restriction, but by augmenting it with additional terms. Civil Code section 1670.5 does not authorize such reformation by augmentation, nor does the arbitration statute." (Armendariz, supra, 24 Cal.4th at pp. 124-125.) In such a situation, the trial court does not have the inherent power to reform contracts, and consequently the court must void the entire arbitration agreement. (Id. at p. 125.)
B. Application of Unconscionability Doctrine
A series of cases have discussed the level of evidence required to establish procedural and substantive unconscionability to find an arbitration agreement unenforceable. These cases also discuss whether the drafting party has presented reasonable justifications for an unconscionable term and whether the invalid provisions could be severed and the balance of the arbitration agreement enforced. Many of these cases address arbitration agreements between an employer and employee, but the rationales of these cases have been extended to other situations.
*15 In Stirlen, supra, 51 Cal.App.4th 1519, plaintiff was hired as defendant's vice-president and chief financial officer, and his employment contract provided for arbitration for any disputes arising out of the employee's employment, including termination. The agreement specifically excluded certain types of disputes from the scope of arbitration, including those relating to the protection of the employer's intellectual and other property and the enforcement of a postemployment covenant not to compete, which were to be litigated in state or federal court. The employee waived the right to challenge the jurisdiction of such a court. (Id. at pp. 1525, 1528-1529.) The arbitration agreement further limited the possible damages that could be recovered, and that once an arbitration claim was filed, the employer would no longer pay any salary or benefits until the claim was resolved. (Id. at p. 1528 .)
Stirlen held the arbitration agreement was a contract of adhesion and procedurally unconscionable, even though the employee in question was a high-level executive, because the employee had "no realistic ability to modify the terms of the employment contract." (Stirlen, supra, 51 Cal.App.4th at p. 1534.) The generic terms were presented after he accepted employment, and were described as standard provisions that were not negotiable. (Ibid.)
Stirlen also found the arbitration agreement was substantively unconscionable because it lacked a "modicum of bilaterality." (Stirlen, supra, 51 Cal.App.4th at p. 1541.) An employee who filed a claim against the employer had to bear not only the inherent shortcomings of arbitration, such as limited discovery, judicial review, and procedural protections, but also significantly limited damages. (Id. at pp. 1537-1540.) In contrast, the employer could pursue claims against the employee without being subject to these limitations, and had written into the agreement special advantages, such as a waiver of jurisdictional objections by the employee if sued by the employer. (Id. at pp. 1541-1542.)
Stirlen clarified, however, that the absence of mutuality in one clause did not automatically invalidate the entire agreement:
"We agree a contract can provide a 'margin of safety' that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable. [Citation.] However, unless the 'business realities' that create the special need for such an advantage are explained in the contract itself, which is not the case here, it must be factually established." (Stirlen, supra, 51 Cal.App.4th at p. 1536.)
Stirlen found no "business reality" to justify the lack of mutuality, and concluded the terms of the arbitration clause were " ' "so extreme as to appear unconscionable according to the mores and business practices of the time and place." ' " (Stirlen, surpa, 51 Cal.App.4th at p. 1542.)
*16 In Kinney, supra, 70 Cal.App.4th 1322, the trial court followed Stirlen and found an arbitration agreement was substantively unconscionable because it compelled the employee, but not the employer, to submit to arbitration. Kinney also found procedural unconscionability based on the manner in which the employer imposed the agreement on the employee:
"In this case, after providing [the] employees assurances that their jobs would not be affected by its takeover of the company, [defendant] provided [plaintiff] with a copy of the Handbook, contained in a large three-ring binder, and told her that she needed to sign the form acknowledging receipt of the Handbook. [Plaintiff] was pressured to sign the form that same day, precluding her from having the time to review the Handbook or the arbitration policy set forth therein. Notably, the language used in the policy to describe its scope is so extensive as to render it difficult for a layperson to read and understand the parameters of the policy. This is particularly true regarding the unilateral nature of the arbitration obligation; after a statement of intent extolling the virtues of utilizing the arbitration process, the policy provides, in a fairly lengthy paragraph, that [defendant] is not required to pursue any claim of its own in an arbitration setting.
"Although the acknowledgment form itself referred to the arbitration policy, the form did not specify the details of that policy, including the fact that [defendant] was not also required to submit claims to arbitration, that [defendant] could modify the policy at any time, with or without notice, and that the policy significantly limited [plaintiff's] procedural and substantive rights. Given that these terms worked so clearly to [defendant's] advantage, and to the detriment of its employees, the element of surprise is satisfied. [Citations.] In any event, to the extent that [plaintiff] knew or was on notice of a general requirement that her claims had to be pursued in arbitration rather than in some other forum, this does not preclude a finding that the arbitration provision is nonetheless unenforceable. [Citation.]" (Kinney, supra, 70 Cal.App.4th at p. 1330.)
In Armendariz, supra, 24 Cal.4th 83, the California Supreme Court extensively addressed procedural and substantive unconscionability, justification, and severance. Plaintiff and another employee were terminated by defendant. They sued defendant and alleged violation of the Fair Employment and Housing Act, along with causes of action based on tort and contract law. Defendant moved to compel arbitration, based on an agreement plaintiff signed when she applied for a job with defendant. Plaintiff opposed the motion to compel, and argued the arbitration agreement was both procedurally and substantively unconscionable. (Id. at pp. 91-93.)
Armendariz found there was "little dispute" the arbitration agreement was an adhesion contract. (Armendariz, supra, 24 Cal.4th at pp. 114-115.)
*17 "It was imposed on employees as a condition of employment and there was no opportunity to negotiate. [¶] Moreover, in the case of preemployment arbitration contracts, the economic pressure exerted by employers on all but the most sought-after employees may be particularly acute, for the arbitration agreement stands between the employee and necessary employment, and few employees are in a position to refuse a job because of an arbitration requirement...." (Armendariz, supra, 24 Cal.4th at p. 115.)
Armendariz found the arbitration agreement was substantively unconscionable, based on Kinney and Stirlen, because it required plaintiff to arbitrate all wrongful termination claims but it did not impose a reciprocal arbitration obligation on defendant. (Armendariz, supra, 24 Cal.4th at pp. 115-116.) In doing so, however, Armendariz explained that even substantively unconscionable terms could be valid if the stronger party provided a reasonable business justification for the clauses:
"We conclude that Stirlen and Kinney are correct in requiring this 'modicum of bilaterality' in an arbitration agreement. Given the disadvantages that may exist for plaintiffs arbitrating disputes, it is unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee, without at least some reasonable justification for such one-sidedness based on 'business realities.' As has been recognized ' "unconscionability turns not only on a 'one-sided' result, but also on an absence of 'justification' for it ." ' [Citation.] If the arbitration system established by the employer is indeed fair, then the employer as well as the employee should be willing to submit claims to arbitration. Without reasonable justification for this lack of mutuality, arbitration appears less as a forum for neutral dispute resolution and more as a means of maximizing employer advantage. Arbitration was not intended for this purpose. [Citation.]
"The employer cites a number of cases that have held that a lack of mutuality in an arbitration agreement does not render the contract illusory as long as the employer agrees to be bound by the arbitration of employment disputes. [Citations.] We agree that such lack of mutuality does not render the contract illusory, i.e., lacking in mutual consideration. We conclude, rather, that in the context of an arbitration agreement imposed by the employer on the employee, such a one-sided term is unconscionable. Although parties are free to contract for asymmetrical remedies and arbitration clauses of varying scope, Stirlen and Kinney are correct that the doctrine of unconscionability 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, supra, 24 Cal.4th at pp. 117-118, italics added.)
*18 Armendariz held that "the ordinary principles of unconscionability may manifest themselves in forms peculiar to the arbitration context," such as a unilateral arbitration clause, without reasonable justification. (Armendariz, supra, 24 Cal.4th at p. 119.) Armendariz concluded the arbitration agreement therein was substantively unconscionable and lacked such a reasonable justification.
Finally, Armendariz acknowledged the trial court retained discretion to sever any illegal clauses and enforce the remainder of the arbitration agreement, pursuant to Civil Code section 1670.5. (Armendariz, supra, 24 Cal.4th at pp. 122-124.) Armendariz concluded, however, that a trial court should refuse to do so when an arbitration agreement is " 'permeated' by unconscionability." (Id. at p. 122.) "Courts are to look to the various purposes of the contract. If the central purpose of the contract is tainted with illegality, then the contract as a whole cannot be enforced. If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate." (Id. at p. 124.) In addition a single unconscionable term could justify a refusal to enforce an arbitration agreement if it were drafted in bad faith, because severing such a provision and enforcing the arbitration agreement would encourage the drafters of such agreements to overreach.
In O'Hare v. Municipal Resource Consultant (2003) 107 Cal.App .4th 267 (O'Hare ), the defendant's employees were required to sign an arbitration agreement, which provided that the employee had to arbitrate all claims against the employer, without discovery, but allowed the employer to file lawsuits against the employee. (Id. at p. 271.) O'Hare held that given the multiple unlawful provisions, "a very low showing of procedural unconscionability is required to bar enforcement of the arbitration provision." (O'Hare, supra, 107 Cal.App.4th at p. 283.) O'Hare acknowledged plaintiff did not present any extrinsic evidence about contract negotiations, but held that procedural unconscionability was inferable from the agreement and the parties' relationship. (Id. at pp. 283-284.) The trial court relied on Armendariz's discussion about the employee's weakness in the bargaining relationship with the employer and found such a situation existed in the plaintiff's relationship with his own employer. O'Hare concluded defendant failed to present any reasonable business justification for this provision, and severance was not possible.
In Szetela, supra, 97 Cal.App.4th 1094, plaintiff opened a credit card account and, a few years later, the credit card company inserted a notice in his billing statement that purported to amend the card member agreement to include an arbitration clause that limited discovery rights and waived any right to be a member of a class action. If plaintiff did not want to accept the terms of the amendment, he could have paid his balance and closed his account, but he did not. Thereafter, plaintiff joined a class action suit against defendant for deceptive business practices and overcharging fees. Defendant moved to compel arbitration of plaintiff's claim on an individual basis, rather than the class action, based on the terms of the arbitration agreement. (Id. at pp. 1096-1097.)
*19 Szetela held the arbitration agreement was procedurally unconscionable, and rejected defendant's argument that plaintiff could have simply cancelled his account and obtained another credit card:
"We disagree this is the relevant test for unconscionability. The availability of similar goods or services elsewhere may be relevant to whether the contract is one of adhesion, but even if the clause at issue here is not an adhesion contract, it can still be found unconscionable. Moreover, 'in a given case, a contract might be adhesive even if the weaker party could reject the terms and go elsewhere. [Citation.]' (Villa Milano Homeowners Assn. v. Il Davorge (2000) 84 Cal.App.4th 819, 827.) Therefore, whether [plaintiff] could have found another credit card issuer who would not have required his acceptance of a similar clause is not the deciding factor.
"Procedural unconscionability focuses on the manner in which the disputed clause is presented to the party in the weaker bargaining position. When the weaker party is presented the clause and told to 'take it or leave it' without the opportunity for meaningful negotiation, oppression, and therefore procedural unconscionability, are present. (See Kinney [, supra,] 70 Cal . App.4th [at p.] 1329.) These are precisely the facts in the case before us. [Plaintiff] received the amendment to the Cardholder Agreement in a bill stuffer, and under the language of the amendment, he was told to 'take it or leave it.' His only option, if he did not wish to accept the amendment, was to close his account. We agree with [plaintiff] that the oppressive nature in which the amendment was imposed establishes the necessary element of procedural unconscionability." (Szetela, supra, 97 Cal.App.4th at p. 1100, italics added.)
In Gutierrez, supra, 114 Cal.App.4th 77, plaintiffs responded to a telephone advertisement to lease an automobile. When they went to the dealership, they learned the monthly lease amount was nearly twice the amount advertised, but decided to enter into the lease agreement. The back of the lease contained numerous contract provisions, including an arbitration clause, but plaintiffs were not advised by the salesperson about the existence of the clause or its presence on the back of the lease. (Id. at pp. 82-84.) Plaintiffs subsequently sued the dealership and alleged they were victimized by a " 'bait and switch' fraud." (Id. at p. 84.) Defendant moved to compel arbitration, and the trial court denied the petition. (Id. at p. 85.)
Gutierrez found the arbitration clause was adhesive and procedurally unconscionable:
"The lease was presented to plaintiffs for signature on a 'take it or leave it' basis. Plaintiffs were given no opportunity to negotiate any of the preprinted terms in the lease. The arbitration clause was particularly inconspicuous, printed in eight-point typeface on the opposite side of the signature page of the lease. Gutierrez was never informed that the lease contained an arbitration clause, much less offered an opportunity to negotiate its inclusion within the lease or to agree upon its specific terms. He was not required to initial the arbitration clause. [Citation.] He either had to accept the arbitration clause and the other preprinted terms, or reject the lease entirely. Under these circumstances, the arbitration clause was procedurally unconscionable. [Citation.]" (Gutierrez, supra, 114 Cal.App.4th at p. 89.)
*20 Gutierrez rejected defendant's argument that "alternative sources of vehicles were available to its customers, defeating any showing of procedural unconscionability." (Gutierrez, supra, 114 Cal.App.4th at p. 89, fn. 8.)
"[N]o evidence was introduced below that other dealers offered automobile lease contracts without similar arbitration provisions. In fact, AutoNation concedes that 'the arbitration provision at issue in this appeal is contained, with minor variations, in an extraordinary number of contracts now enforceable in California.' Regardless, where, as here, plaintiffs have shown the arbitration agreement is procedurally unconscionable due to surprise, plaintiffs need not also demonstrate the agreement was oppressive, i .e., arising from an absence of meaningful choice. [Citations.]" (Gutierrez, supra, 114 Cal.App.4th at p. 89, fn. 8.)
Gutierrez found the terms were substantively unconscionable because the consumer was required to post expensive fees to obtain arbitration:
"We conclude that where a consumer enters into an adhesive contract that mandates arbitration, it is unconscionable to condition that process on the consumer posting fees he or she cannot pay. It is self-evident that such a provision is unduly harsh and one-sided, defeats the expectations of the nondrafting party, and shocks the conscience. While arbitration may be within the reasonable expectations of consumers, a process that builds prohibitively expensive fees into the arbitration process is not. [Citation.] To state it simply: it is substantively unconscionable to require a consumer to give up the right to utilize the judicial system, while imposing arbitral forum fees that are prohibitively high. Whatever preference for arbitration might exist, it is not served by an adhesive agreement that effectively blocks every forum for the redress of disputes, including arbitration itself." (Gutierr

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