Manning Leaver successful in Court of Appeal decision to enforce arbitration agreement in vehicle sale contract

Manning Leaver attorneys Bob Daniels and Crystal Yagoobian were successful in obtaining a favorable Court of Appeal decision in the case of Gonzalez v. Metro Nissan of Redlands. The case was briefed and argued before the Court of Appeal by Manning Leaver attorney Crystal Yagoobian with the result that the Court of Appeal overruled the trial court's ruling denying the motion of Metro Nissan to have the case go to arbitration and ordered the trial court to compel arbitration.

Maria and Jesus Gonzalez filed a lawsuit against a dealership and other defendants alleging that the vehicle they purchased from the dealership was defective and that their purchase contract had disclosure violations under the Consumer Legal Remedies Act and the Automobile Sales Finance Act.  Defendants filed a motion to compel arbitration at the onset of the litigation based on the arbitration agreement the Gonzalezes had agreed to on the back of the purchase contract.  The motion was originally granted by the trial court in September 2011, but that decision was later vacated by the trial court in November 2011 on its own motion based on the California Court of Appeal’s decision in Sanchez v. Valencia Holding Co., LLC (2011) 201 Cal.App.4th 74 which found the identical arbitration agreement unenforceable.  Because defendants had no choice in the matter, they proceeded to litigate the case and the Gonzalezes sought leave of court to amend their complaint to add class allegations.  However, on March 21, 2012, the California Supreme Court granted review of Sanchez, making the once published case unciteable and, consequently, no longer binding legal precedent.  Defendants promptly renewed their motion to compel arbitration.  This time, however, the trial court denied the motion, finding that the parties had already commenced the litigation process, thereby waiving their right to arbitration.    Defendants appealed. 

The Court of Appeal reversed the trial court and held that defendants had not waived their right to compel arbitration because a party does not waive error by deferring to an erroneous, adverse ruling after making appropriate objections or motions.  The Court of Appeal reasoned that the Gonzalezes could not show prejudice as a result of the short period of time that the case was litigated.  The Court of Appeal further held that the arbitration clause was not unconscionable.  The Gonzalezes pointed to four terms of the arbitration agreement that they alleged were substantively conscionable: (1) either party could request a new arbitration by a three-arbitrator panel if the award were $0, exceeded $100,000, or granted injunctive relief; (2) defendants were only required to pay a maximum of $2,500 of the Gonzalezes’ costs, which could be reimbursed at the arbitrator’s discretion; (3) the Gonzalezes could choose only certain arbitration organizations without defendants’ approval; and (4) self-help remedies such as repossession were excluded from arbitration.  The Court of Appeal ultimately concluded the arbitration agreement was fully enforceable because none of the four terms was “so one-sided as to shock the conscience.”  

Click here to read the full court opinion.