California is changing its tune. Although previously known for decisions that flouted federal arbitration law, its decision yesterday in Sanchez shows the current California Supreme Court will abide by SCOTUS’s interpretation of the FAA. After a trial court and intermediate appellate court had ruled that the arbitration clause in a consumer contract was unconscionable, the California Supreme Court reversed, finding the clause was enforceable. Sanchez v. Valencia Holding Co., LLC, __ P.3d __, 2015 WL 4605381 (Aug. 3, 2015).
The arbitration clause at issue was part of a contract to buy a used Mercedes-Benz. The buyer alleged that the seller made false representations about the car’s condition and violated California laws about various fees and charges. The buyer wanted to pursue a class action with other affected car buyers. The seller moved to compel arbitration. The trial court denied the motion and the Court of Appeals affirmed, but on different grounds. The California Supreme Court then granted review.
