In comparison to trials, arbitration can expedite dispute resolution, help avoid class-action lawsuits, and circumvent the potentially costly and time-consuming litigation process. Therefore, it is imperative that businesses ensure arbitration clauses are enforceable.

On December 21, 2023, in Hasty v. American Automobile Assn. of Northern Cal., Nev. & Utah, a California appellate court in the 3^rd district upheld a trial court ruling that an arbitration agreement was unenforceable on the grounds that it was both procedurally and substantively unconscionable. The main factors in determining procedural unconscionability included the plaintiff’s experience of the arbitration agreement on a small smartphone screen versus a desktop monitor or paper printout, and the ease with which the plaintiff could electronically click “I agree” without opening to the actual arbitration agreement.

Generally, arbitration agreements that are excessively one-sided are deemed substantively unconscionable. In Hasty, the appellate court agreed that the arbitration agreement was substantively unconscionable because:

1. The confidentiality provision was overly broad;
2. The plaintiff’s waiver of the right to bring a claim under California’s Private Attorneys General Act (PAGA) was not valid;
3. The plaintiff’s waiver of any remedy or relief from a government agency was overly harsh and shocked the conscience; and
4. The link to the arbitration agreement was broken.

The decision emphasizes the heightened scrutiny arbitration agreements must survive and highlights the need to ensure that such agreements are procedurally and substantively conscionable. If not, a court may opt not to enforce an agreement despite the presence of a severance provision. Considering this stance, businesses should review their arbitration agreements and the procedure with which they send and obtain electronic acknowledgements.

***Keep in mind, the above is simply a brief overview of a recent arbitration case. There are other regulations and elements that can factor into an unconscionability test. If you have any questions or would like to discuss further, please contact our office***