Dealing a solid blow to frivolous class action litigation in California, the California Supreme Court issued its long awaited decision in Sanchez vs. Valencia Holding Co. upholding the enforceability of arbitration provisions with class action waivers in consumer agreements, including the preprinted 553 Retail Installment Sales Contract used by virtually every car dealership in California.     Following the United States Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, the California Supreme Court emphasized that the standard of avoiding the enforceability of an arbitration agreement is a high one, and that the party seeking to avoid arbitration must show something much more than a “bad bargain” before being able to avoid the enforcement of the arbitration agreement.  This standard of review would apply even if the customer neglected to read or understand the arbitration agreement contained within the standard form consumer contract.  The Sanchez case was filed in March 2010 as a class action that arose out of Plaintiff’s purchase of a used vehicle from a new car dealer.  The customer filed suit against the dealer, alleging a variety of technical violations in connection with the preparation of his purchase contract.  The dealer sought to arbitrate the consumer’s claims pursuant to the arbitration provision contained in the purchase contract.  Plaintiff claimed that the arbitration provision of the agreement, including the class action waiver, were unenforceable under California law.

This is an important victory for dealers who are often sued by consumer attorneys in class action lawsuits for technical violations of California’s Automobile Sales Finance Act.  This ruling will allow dealers to resolve disputes in arbitration, keeping the costs of litigation down, which will ultimately translate to a lower overhead, and thus, lower prices for consumers.

Read the Sanchez v. Valencia Holding Company ruling.