Opinion
NOT TO BE PUBLISHED
Santa Clara County Super. Ct. No. CV140751
Mihara, J.
At issue in this writ proceeding is an order compelling private arbitration. As explained below, we conclude that the challenged arbitration provisions are unconscionable, that the defects cannot be cured by severance, and that the agreements thus are unenforceable. We reach the same conclusion with respect to the alternative judicial reference provisions. We shall therefore grant the writ petition.
BACKGROUND
This litigation involves 127 plaintiffs (petitioners here) and a single named defendant, MHC Operating Limited Partnership (real party in interest here). Defendant owns and operates California Hawaiian Mobile Estates, a mobilehome park in San Jose. Plaintiffs are current or former tenants of the park who assert claims of substandard conditions there.
Plaintiffs’ Complaint
This action was brought in April 2009 by 124 of the plaintiffs. A first amended complaint was filed in August 2009, adding three more plaintiffs. Based on allegations that defendant failed to adequately provide or maintain facilities, services, and physical improvements in the mobilehome park, plaintiffs assert various claims, including nuisance and breach of contract. As alleged in the first amended complaint, each plaintiff was or had been a homeowner or resident of the park “during the past four years under a written agreement” with defendant that took various forms. Some of the agreements contain provisions for arbitration and judicial reference.
Plaintiffs also assert eight other causes of action: negligence; intentional interference with property rights; breach of the covenant of good faith and fair dealing; negligence per se; unfair business practices; breach of the warranty of habitability; breach of the covenant of quiet enjoyment; and declaratory and injunctive relief.
Agreements to Arbitrate
Of the 127 plaintiffs, 41 are signatories to agreements with arbitration provisions. The provisions are contained in four types of lease or rental agreements, designated “A” through “D” by the parties. Most of the 41 affected plaintiffs signed either A or B agreements; only one C and one D agreement are at issue.
The arbitration provisions in the A, B, and D agreements share a number of similarities. All three require arbitration through Judicial Arbitration and Mediation Service, Inc. (JAMS). Under all three agreements, once the arbitrator has provided an estimate of anticipated fees and costs, each party must deposit half of the estimated amount within five days. Under the A agreement, a party who fails to make the required deposit forfeits the right to defend or prosecute the claim; the B and D agreements have no express forfeiture provisions. The D agreement prohibits the joinder of claims by or against residents. All three types of agreements – A, B, and D – exempt from arbitration actions for unlawful detainer, forcible detainer, and injunctive relief.
In contrast to the A, B, and D agreements, the C agreement does not call for JAMS arbitration. Instead, it requires arbitration before a three-member arbitration panel. Costs are to be borne equally by the parties, set by the panel, and payable upon demand of the panel. If either party fails to pay its share of costs, the panel may abate the arbitration or proceed at its discretion. The C agreement limits arbitration to claims of park deficiencies; it expressly exempts all other matters from arbitration, including eviction and unlawful detainer.
Each of the four types of agreements contains an alternative provision for judicial reference. The reference provisions in the A, B, and D agreements, which are identically phrased, read as follows: “If these arbitration provisions are held unenforceable for any reason, it is agreed that all arbitrable issues in any judicial proceeding will be subject to and referred on a motion by any party for hearing and decision by a referee as provided by California Code of Civil Procedure Section 638 et seq.” The reference provision in the C agreement is similarly phrased and functionally identical.
Defendant’s Motion to Compel Arbitration
Defendant moved to compel arbitration as to those plaintiffs whose leases contain arbitration agreements. Alternatively, defendant sought an order for judicial reference. Defendant supported its motion with a memorandum of points and authorities and two declarations. The agreements containing arbitration provisions were attached to one declaration. Defendant also lodged with the court representative copies of each of the four types of rental agreements containing arbitration clauses. In addition, defendant filed a request for judicial notice.
Defendant made its motion on the ground that the affected plaintiffs’ “respective rental agreements each contain an arbitration provision” covering their claims. In its memorandum, defendant argued that the arbitration provisions were neither unconscionable nor contrary to public policy, and that any unenforceable provisions could be severed. Defendant further argued that there were no common issues of law or fact, and thus no risk of inconsistent rulings, even though most of the plaintiffs were not obliged to arbitrate their claims.
Plaintiffs opposed the motion. They submitted a memorandum of points and authorities, their counsel’s declaration, and declarations from 30 of the 41 affected plaintiffs. Plaintiffs also filed objections to defendant’s proffered evidence and to its request for judicial notice.
Plaintiffs asked the trial court to deny the motion on several grounds. First, plaintiffs argued that ordering “arbitration as to only some of the Plaintiffs” risked inconsistent rulings. Next, plaintiffs argued that the provisions “are void as a matter of public policy” under cited statutory provisions. Additionally, plaintiffs argued that the arbitration provisions are unconscionable and thus unenforceable, and that severance would not cure the defects. Finally, plaintiffs urged the court to deny defendant’s alternative motion for a judicial reference.
In support of their public policy arguments, plaintiffs relied on Civil Code section 798.77, which is part of the Mobilehome Residency Law, and on Civil Code section 1953, subdivision (a), which governs landlord-tenant relationships.
In reply, defendant submitted a memorandum and three additional declarations. Defendant disputed each of plaintiffs’ arguments.
Hearing and Decision
In September 2009, the respondent court conducted a hearing on defendant’s motion. At the conclusion of the hearing, the court granted the motion to compel arbitration. Having reviewed the parties’ submissions, the court stated that it was “persuaded” that the arbitration provisions were “valid” and that the parties had signed them “knowingly and intelligently.” The court discounted “the declaration provisions to the contrary... as the self-interest of the declarants.”
On October 8, 2009, the court filed a written order, granting defendant’s motion to compel arbitration and ordering the judicial action stayed pending the outcome of the arbitration.
Proceedings in this Court
In November 2009, plaintiffs brought this writ petition, verified by their attorney, and supported by a memorandum of points and authorities plus a five-volume record of exhibits. Defendant filed preliminary opposition, to which plaintiffs replied. With this court’s leave, defendant filed a sur-reply. In February 2010, we issued an order to show cause, we stayed the trial court proceedings, and we granted plaintiffs’ request for judicial notice. Thereafter, defendant filed a formal return, to which plaintiffs replied.
In this court, plaintiffs argue that the trial court erred in ordering arbitration, in that: (1) the arbitration provisions are void under California statutory law; (2) the arbitration provisions are unconscionable, and severance will not cure the defects; (3) there is a possibility of conflicting rulings; and (4) the judicial action should not have been stayed. Additionally, in reply to defendant’s arguments, plaintiffs contend that writ review is proper and that ordering the entire case to reference is beyond the court’s authority.
For its part, defendant argues: (1) writ review is inappropriate; (2) the arbitration provisions are not void; (3) substantial evidence supports the trial court’s finding that the arbitration provisions are not unconscionable; (4) in any event, any unconscionable provision may be severed; (5) the trial court did not abuse its discretion in compelling arbitration as to some of the plaintiffs and ordering a stay as to the others; and (6) even if the arbitration provisions are not enforceable, a judicial reference is proper.
DISCUSSION
We first address the validity of the arbitration provisions. We then turn to the question of judicial reference.
Arbitration Provisions
To establish the proper framework for our discussion of the challenged arbitration provisions, we begin by summarizing the governing legal principles.
I. Legal Principles
A. Arbitration
A party to an arbitration agreement may petition the court to compel arbitration. (Code Civ. Proc., § 1281.2.) “A petition to compel arbitration based on a written arbitration agreement must be granted unless grounds exist to revoke the agreement.” (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1468 (Roman).) “An agreement to arbitrate, like any other contract, is subject to revocation if the agreement is unconscionable.” (Ibid.; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 98 (Armendariz).) That is true both under California law and under the Federal Arbitration Act. (Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 86 (Gutierrez); Higgins v. Superior Court (2006) 140 Cal.App.4th 1238, 1247 (Higgins).) Additionally, California imposes “minimum requirements for the arbitration of unwaivable statutory claims.” (Armendariz, at pp. 99-113; Gentry v. Superior Court (2007) 42 Cal.4th 443, 467.)
In pertinent part, that provision states: “On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists, unless it determines that: [¶] (a) The right to compel arbitration has been waived by the petitioner; or [¶] (b) Grounds exist for the revocation of the agreement. [¶] (c) A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (Code Civ. Proc., § 1281.2.)
“The party seeking to compel arbitration bears the burden of proving that an arbitration agreement exists. The opposing party then must prove any defense to enforcement of the arbitration agreement.” (Crippen v. Central Valley RV Outlet (2004) 124 Cal.App.4th 1159, 1164 (Crippen); Higgins, supra, 140 Cal.App.4th at p. 1249.) That includes the defense of unconscionability. (Crippen, at p. 1164.)
B. Unconscionability
“Both procedural and substantive unconscionability are required to invalidate an arbitration clause.” (Martinez v. Master Protection Corp. (2004) 118 Cal.App.4th 107, 113.) “The procedural element of an unconscionable contract generally takes the form of a contract of adhesion....” (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071.) “Procedural unconscionability focuses on the elements of oppression and surprise.” (Roman, supra, 172 Cal.App.4th at p. 1469; Abramson v. Juniper Networks, Inc. (2004) 115 Cal.App.4th 638, 662 (Abramson).) Procedural unconscionability thus concerns “the manner in which the agreement was negotiated.” (Martinez v. Master Protection Corp., at p. 113.) “Substantive unconscionability, on the other hand, focuses on the terms of the agreement and the presence of overly harsh or one-sided results.” (Ibid.) “The two aspects need not be present to the same degree.” (Ibid.) Courts instead use a “sliding scale” approach, which balances procedural and substantive unconscionability. (Armendariz, supra, 24 Cal.4th at p. 114.) Under that approach, “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.” (Ibid.)
C. Review
“Orders compelling arbitration are considered interlocutory and not directly appealable.” (Parada v. Superior Court (2009) 176 Cal.App.4th 1554, 1566 (Parada); Zembsch v. Superior Court (2006) 146 Cal.App.4th 153, 160 (Zembsch).) However, writ review is available in a proper case. (Parada, at pp. 1566-1567; Zembsch, at p. 160.)
“California courts have held that writ review of orders compelling arbitration is proper in at least two circumstances: (1) if the matters ordered arbitrated fall clearly outside the scope of the arbitration agreement or (2) if the arbitration would appear to be unduly time consuming or expensive.” (Zembsch, supra, 146 Cal.App.4th at p. 160.) The first condition is satisfied if “the matters ordered arbitrated are not within the scope of an enforceable arbitration agreement.” (Zembsch, at p. 161, italics added.) The expense of unwarranted arbitration in such cases satisfies the second condition. (Ibid.; see Parada, supra, 176 Cal.App.4th at p. 1567 [writ review justified by “the high cost of arbitrating before a three-judge panel at JAMS and the amount of time necessary to complete arbitration”].) As one court put it, “any arbitration compelled in the absence of a valid, enforceable arbitration agreement is an unduly time consuming and expensive proposition. Writ review is the appropriate way to review the challenged order and avoid having parties try a case in a forum where they do not belong, only to have to do it all over again in the appropriate forum.” (Medeiros v. Superior Court (2007) 146 Cal.App.4th 1008, 1014, fn. 7.)
“Whether an arbitration provision is unconscionable is ultimately a question of law.” (Higgins, supra, 140 Cal.App.4th at p. 1250.) De novo review is proper “if extrinsic evidence is not at issue or is undisputed.” (Crippen, supra, 124 Cal.App.4th at p. 1164.) But if the order depends on conflicting extrinsic evidence, the substantial evidence rule applies. (Parada, supra, 176 Cal.App.4th at p. 1567.) In such cases, the reviewing court will imply all necessary findings to support the order compelling arbitration. (Ibid.)
II. Analysis
With the foregoing principles in mind, we examine the order challenged here. When this court issued the order to show cause, we determined that writ review was appropriate in this case because of the apparent high cost of the proposed arbitration and because the arbitration agreements appeared unenforceable. (See Zembsch, supra, 146 Cal.App.4th at pp. 160-161.) We now reach the merits.
A. Procedural Unconscionability
1. Adhesion
“Unconscionability analysis begins with an inquiry into whether the contract is one of adhesion.” (Armendariz, supra, 24 Cal.4th at p. 113; Parada, supra, 176 Cal.App.4th at p. 1570.) The typical adhesive contract is defined by three elements: it is (1) standardized, (2) drafted by the party with superior bargaining power, and (3) presented to the other contracting party on a take-it-or-leave-it basis. (Armendariz, at p. 113; Bruni v. Didion (2008) 160 Cal.App.4th 1272, 1291.)
In assessing the arbitration agreements at issue here, we consider the three definitional elements of adhesive contracts in light of the record before us. That record includes the agreements themselves, as well as extrinsic evidence of the circumstances surrounding their execution, presented through the parties’ declarations. (Cf., Crippen, supra, 124 Cal.App.4th at p. 1165 [plaintiff failed to offer “any evidence of the circumstances surrounding the execution of the agreement, so he could not show inequality of bargaining power, lack of negotiation, or lack of meaningful choice”]; id. at p. 1166 [“no extrinsic evidence of procedural unconscionability is necessary where it is inferable from the parties’ relationship and the agreement itself”].) As the record demonstrates, all three elements of adhesion are present in this case.
First, the agreements are part of standardized, preprinted forms, apparently drafted by defendant. (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1293 [“arbitration provisions were part of a preprinted form contract”].) Only plaintiffs’ names and site numbers were added by hand to the preprinted lease and rental agreements. (Higgins, supra, 140 Cal.App.4th at p. 1252 [“none of the petitioners’ names or other identifying information is included in the body of the document”]; O’Hare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267, 284 [only the plaintiff’s salary was “filled in by hand”].) Defendant does not dispute this element.
Second, it seems clear that plaintiffs are the weaker party with respect to negotiation of the arbitration clause. (See Abramson, supra, 115 Cal.App.4th at p. 662.) “Characteristically, the form contract is drafted by the party with the superior bargaining position.” (A & M Produce Co. v. FMC Corp. (1982) 135 Cal.App.3d 473, 486.) As more specifically relevant here, the California Supreme Court has noted the perception of “economic imbalance of power in favor of mobilehome park owners” vis-à-vis mobilehome owners residing in the park. (Galland v. City of Clovis (2001) 24 Cal.4th 1003, 1010.) In a similar vein, this court has discussed legislative concern “with the generally weaker bargaining position of tenants as compared to landlords and leverage a landlord may exert by making the availability of rental housing contingent upon the waiver of rights.” (Jaramillo v. JH Real Estate Partners, Inc. (2003) 111 Cal.App.4th 394, 403 [discussing Civ. Code, § 1953].) Considering these authorities in light of the circumstances of this case, it seems apparent that defendant enjoyed greater bargaining power than plaintiffs. Defendant does not seriously contend otherwise.
Third, the agreements apparently were presented to plaintiffs on a take-it-or-leave-it basis. (See Abramson, supra, 115 Cal.App.4th at p. 663; Higgins, supra, 140 Cal.App.4th at p. 1252.) There is no evidence that plaintiffs had an “opportunity to negotiate.” (Armendariz, supra, 24 Cal.4th at p. 116; Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1534.) Many of the plaintiffs’ declarations include statements such as these: “I was told that I could not move into California Hawaiian Mobile Estates unless I signed the rental agreement that was given to me” and “I was not told that I could refuse to accept any term of the rental agreement, including the provisions regarding arbitration and judicial reference.” Moreover, plaintiffs’ opportunity to negotiate was constrained by the economic pressure on them to sign the agreements in order to move into the park. (See Armendariz, supra, 24 Cal.4th at p. 115 [discussing economic pressure]; Galland v. City of Clovis, supra, 24 Cal.4th at p. 1010 [referring to imbalance of economic power in mobilehome park context].)
As evidence that the agreements were not offered on a take-it-or-leave-it basis, defendant cites the declaration of its employee, Jennifer Barrett, who stated: “The arbitration provisions are voluntary and optional and prospective residents if they chose arbitration are requested to initial their agreement to arbitrate. Plaintiffs initialed their respective arbitration provisions acknowledging their agreement to arbitrate any disputes between themselves and the Park.” Defendant posits this statement as substantial evidence refuting plaintiffs’ assertions that the agreements were offered on a take-it-or-leave-it basis.
We disagree. Barrett’s characterization of the provisions as “voluntary and optional” is a bare legal conclusion. (Guthrey v. State of California (1998) 63 Cal.App.4th 1108, 1120.) Defendant did not dispute the repeated assertions in plaintiffs’ declarations that plaintiffs were not presented with the rental agreements until after they had either deposited their down payment or completely paid for their mobilehome in the park. Defendant’s own evidence, contained in the declaration of its key witness Barrett, described the park’s normal practice of providing the rental agreements to prospective residents the day before signing them and sitting down with residents to review and sign the agreements. However, Barrett did not dispute that the prospective residents already were under contract to purchase their mobilehomes. Moreover, Barrett could recall no instance in which a prospective resident either expressed concern about a rental agreement or arbitration provision or requested changes. (Cf., Pardee Construction v. Superior Court (2002) 100 Cal.App.4th 1081, 1087 [inference of adhesion from the fact that “none of the hundreds of home purchasers struck out the judicial reference provision”].) Additionally, defendant’s admitted custom and practice was to require a prospective tenant to sign a written rental agreement before moving into the park. Finally, beyond defendant’s practices, nothing in any of the agreements here “suggests it was the product of ‘give and take.’ ” (O’Hare v. Municipal Resource Consultants, supra, 107 Cal.App.4th at p. 284.) To the contrary, the record as a whole supports a finding “that plaintiffs had to accept the arbitration provisions if they wanted to” rent a space in defendant’s mobilehome park. (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1293.)
On this record, considering all three elements of adhesion, there can be “little dispute” that the agreements are adhesive. (Armendariz, supra, 24 Cal.4th at pp. 114-115.) They are standardized contracts, apparently drafted by defendant as the stronger bargaining party, and imposed on plaintiffs, without negotiation, as a condition of residence in the park. (Id. at p. 115.)
As has been said, however, adhesive contracts “are worthy of neither praise nor condemnation, only analysis.” (Higgins, supra, 140 Cal.App.4th at p. 1248.) “Recent appellate decisions have focused more on what is unconscionable and less on what is adhesive.” (Ibid.) The adhesive nature of the agreements thus “ ‘heralds the beginning, not the end, of our inquiry into its enforceability.’ ” (Parada, supra, 176 Cal.App.4th at p. 1571.) “A procedural unconscionability analysis also includes consideration of the factors of surprise and oppression.” (Ibid.) We turn to those questions now.
2. Surprise
“ ‘Procedural surprise focuses on whether the challenged term is hidden in a prolix printed form or is otherwise beyond the reasonable expectation of the weaker party.’ ” (Parada, supra, 176 Cal.App.4th at p. 1571.)
We first consider whether the provisions challenged here are hidden in prolix forms. We conclude that they are not. Some of the agreements at issue here are lengthy; the B agreement and the D agreement each comprise nearly forty pages. But the arbitration provisions are not hidden, either in those two agreements or in the A and C agreements. To the contrary, in each of the four types of agreement, the arbitration provision appears entirely in all capital letters, with a prominent descriptive caption and a space for the resident’s initials. (See Crippen, supra, 124 Cal.App.4th at p. 1165 [provision “was printed on a separate page, in ordinary type, with ‘Arbitration Addendum’ at the top, and was signed separately by plaintiff”].) Plaintiffs’ initials on the provisions support an implied finding that the provisions are not hidden. (Woodside Homes of Cal., Inc. v. Superior Court (2003) 107 Cal.App.4th 723, 729.)
We next consider plaintiffs’ reasonable expectations. “Arbitration itself is a fairly common means of dispute resolution and would not be beyond the reasonable expectation of the weaker party.” (Parada, supra, 176 Cal.App.4th at p. 1571.) But the same may not be true of particular arbitration provisions. (Ibid.) One relevant example here is the provision in the D agreement that prohibits the joinder of claims by or against residents. “The weaker party would not reasonably expect that his or her claims could not be joined with others in a single proceeding.” (Ibid.) Another example here is the provision for three arbitrators contained in the C agreement. Again, “the weaker party would not reasonably expect any dispute arising under the [agreement] to be arbitrated before a panel of three private arbitrators, the fees for whom are not expressly set forth in the agreements.” (Ibid.) Furthermore, none of the four agreements includes or refers to an arbitration fee schedule. “While arbitration may be within the reasonable expectations of consumers, a process that builds prohibitively expensive fees into the arbitration process is not.” (Gutierrez, supra, 114 Cal.App.4th at p. 90.) Finally, surprise may be inferred because the agreements neither attach the governing arbitration rules nor specify whether the “rules in effect at the time of signing or the time of arbitration would control.” (Crippen, supra, 124 Cal.App.4th at p. 1167, citing Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1406, 1407.) Collectively, these circumstances strongly suggest that the arbitration provisions were beyond plaintiffs’ reasonable expectations. (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1277.)
In any event, surprise “is not a necessary predicate to a finding of procedural unconscionability.” (Abramson, supra, 115 Cal.App.4th at p. 663.) “Procedural unconscionability may result from ‘surprise or oppression.’ ” (Ibid.) There is no “rule that if a party reads an agreement he or she is barred from claiming it is unconscionable. Such a rule would seriously undermine the unconscionability defense.” (Higgins, supra, 140 Cal.App.4th at p. 1251.) “A contract term may be held to be unconscionable even if the weaker party knowingly agreed to it.” (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1289.) Knowledge “does not preclude a finding of procedural unconscionability” if the contract is oppressive. (Abramson, at p. 663.) We therefore turn to the question of oppression.
3. Oppression
“Where the parties to a contract have unequal bargaining power and the contract is not the result of real negotiation or meaningful choice, it is oppressive.” (Gutierrez, supra, 114 Cal.App.4th at p. 87; Parada, supra, 176 Cal.App.4th at p. 1572.)
Plaintiffs assert that the agreements were oppressive because they were under economic pressure to sign them. Many of the plaintiffs’ declarations include a statement such as this: “I was under economic pressure to sign the rental agreement because I had already purchased my home, then was told that I had to sign the presented rental agreement to move into the Park.” Defendant characterizes this claim as “misleading.” Defendant points out that California law requires a signed rental agreement for transfer of a mobilehome remaining in the mobilehome park. (Civ. Code, § 798.75, subd. (a).)
The California Supreme Court has recognized the interrelationship between economic pressure and unconscionability in the employment context. As the court said in Armendariz, “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.) And in Gentry, the high court said: “Given the inequality between employer and employee and the economic power that the former wields over the latter [citation], it is likely that... employees felt at least some pressure not to opt out of the arbitration agreement.” (Gentry v. Superior Court, supra, 42 Cal.4th at p. 472; see also, e.g., Fitz v. NCR Corp. (2004) 118 Cal.App.4th 702, 722.)
Economic pressure has been noted in the context of other relationships as well, including that involving mobilehome owners and mobilehome park owners. “Mobile homes are largely immobile as a practical matter, because the cost of moving one is often a significant fraction of the value of the mobile home itself. They are generally placed permanently in parks; once in place, only about 1 in every 100 mobile homes is ever moved.... The mobile home owner often invests in site-specific improvements such as a driveway, steps, walkways, porches, or landscaping. When the mobile home owner wishes to move, the mobile home is usually sold in place, and the purchaser continues to rent the pad on which the mobile home is located.” (Yee v. Escondido (1992) 503 U.S. 519, 523; Galland v. City of Clovis, supra, 24 Cal.4th at p. 1009.) “The immobility of the mobilehome, the investment of the mobilehome owner, and restriction on mobilehome spaces, has sometimes led to what has been perceived as an economic imbalance of power in favor of mobilehome park owners....” (Galland v. City of Clovis, at p. 1010; see also, e.g., Jaramillo v. JH Real Estate Partners, Inc., supra, 111 Cal.App.4th at p. 403 [concern over “generally weaker bargaining position of tenants as compared to landlords”]; cf., Crippen, supra, 124 Cal.App.4th at p. 1166 [no “economic pressure” and no “great disparity of bargaining power” in relationship between buyer and seller of recreational vehicle]; Gutierrez, supra, 114 Cal.App.4th at p. 97 [consumer “seeking a new vehicle” faces “significantly less economic pressure” than job-seeker].)
In this case, the presence of economic pressure is apparent. To paraphrase Armendariz, “the economic pressure exerted by [the park owner] may be particularly acute, ” since “few [mobilehome owners] are in a position to refuse a [rental agreement] because of an arbitration requirement.” (Armendariz, supra, 24 Cal.4th at p. 115.)
To sum up, considering adhesion, surprise, and oppression, plaintiffs have made a strong showing of procedural unconscionability. That brings us to the question of substantive unconscionability.
B. Substantive Unconscionability
Plaintiffs assert four bases for their claim of substantive unconscionability: (1) lack of mutuality, (2) prohibitive arbitral costs, (3) prohibition on joinder, and (4) unduly onerous notice requirements.
1. Lack of Mutuality
“Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided.” (Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1071.) “In assessing substantive unconscionability, the paramount consideration is mutuality.” (Abramson, supra, 115 Cal.App.4th at p. 664.) “This does not mean that parties may not choose to exclude particular types of claims from the terms of arbitration.” (Fitz v. NCR Corp., supra, 118 Cal.App.4th at p. 723.) But an agreement is substantively unconscionable if it requires the weaker party to arbitrate its claims while giving the stronger party a choice of forums for its claims, without reasonable justification. (Armendariz, supra, 24 Cal.4th at p. 119; Little v. Auto Stiegler, Inc., at p. 1072.) Reasonable justification may be shown “if ‘business realities’ create a special need for the advantage.” (Fitz v. NCR Corp., at p. 723, quoting Armendariz, at p. 117; Little v. Auto Stiegler, Inc., at p. 1073.)
In this case, three of the agreements – A, B, and D – require the arbitration of all claims, except actions for unlawful detainer, for forcible detainer, and for injunctive relief. The arbitration provision in the C agreement covers only claims of park deficiencies, while expressly exempting all other matters from arbitration, including eviction and unlawful detainer.
According to plaintiffs, these provisions are one-sided because only their claims against defendant are subject to arbitration. Defendant disagrees, arguing that the exemptions or “carve-outs” from arbitration apply equally to both parties. We agree with plaintiffs. The agreements challenged here compel arbitration of the claims that plaintiffs are most likely to bring against defendant, while exempting from arbitration the claims that defendant is most likely to bring against plaintiffs. (See Abramson, supra, 115 Cal.App.4th at p. 665; Martinez v. Master Protection Corp., supra, 118 Cal.App.4th at p. 115; Mercuro v. Superior Court (2002) 96 Cal.App.4th 167, 175-176.) In particular, the arbitration agreements carve out unlawful detainer and eviction actions. “The purpose of the unlawful detainer statutes is to provide the landlord with a summary, expeditious way of getting back his property when a tenant fails to pay the rent or refuses to vacate the premises at the end of his tenancy.” (Nork v. Pacific Coast Medical Enterprises, Inc. (1977) 73 Cal.App.3d 410, 413; see Code Civ. Proc., § 1161.) The agreements thus lack mutuality, “both facially and operationally.” (Abramson, at p. 665.)
Plaintiffs next assert that there is no justification for the unilateral provisions. Defendant disagrees, arguing that the carve-outs are necessary because the exempt actions “cannot” be heard by an arbitrator. Defendant offers no authority to support its argument, which lacks merit in any event. Concerning the agreements’ exemption for unlawful detainer actions, case law reflects that arbitrators may hear and decide such actions. (See Pioneer Take out Corp v. Bhavsar (1989) 209 Cal.App.3d 1353, 1356-1357; Gill Petrolium, Inc. v. Hayer (2006) 137 Cal.App.4th 826, 830.) With respect to the agreements’ exemption for actions for injunctive relief, “it is well settled arbitrators commonly provide equitable relief as part of their decision” – including permanent injunctions. (O’Hare v. Municipal Resource Consultants, supra, 107 Cal.App.4th at p. 278; Swan Magnetics, Inc. v. Superior Court (1997) 56 Cal.App.4th 1504, 1510; cf., Cruz v. PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 316 [plaintiff’s requests to enjoin deceptive advertising practices, made on public’s behalf, were not arbitrable].) Furthermore, “pending the outcome of the arbitration, ” injunctive relief may be sought in court. (O’Hare v. Municipal Resource Consultants, at p. 277; see also, e.g., Fitz v. NCR Corp., supra, 118 Cal.App.4th at p. 723; Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1537.) Beyond its assertion that the carve-outs are not arbitrable, defendant offers no other justification for the unilateral arbitration agreement. (See Martinez v. Master Protection Corp., supra, 118 Cal.App.4th at p. 115.) “Without such justification, we must assume that” the agreement is unconscionable. (Armendariz, supra, 24 Cal.4th at p. 120; O’Hare v. Municipal Resource Consultants, at p. 277.)
2. Costs
The question of costs has two distinct aspects. The first applies generally in unconscionability analysis; the second relates specifically to statutory claims.
First, as a general matter, “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.” (Gutierrez, supra, 114 Cal.App.4th at pp. 89-90, fn. omitted [automobile lease]; accord, Parada, supra, 176 Cal.App.4th at p. 1571 [investment].) Additionally, “arbitral costs may be unconscionable for other reasons. For example, a predispute arbitration clause should not impose excessive costs relative to the recovery sought [citation]....” (Gutierrez, at p. 89, fn. 9; Parada, at p. 1581 [arbitral cost provisions “evince a high degree of substantive unconscionability in light of the amount of recovery sought”].) Courts consider “the amount of arbitration fees and costs, and the ability of the party resisting arbitration to pay them, as factors in assessing substantive unconscionability of a predispute arbitration agreement.” (Parada, at p. 1579.)
Second, as specifically related to statutory claims, “when an employer imposes mandatory arbitration as a condition of employment, the arbitration agreement or arbitration process cannot generally require the employee to bear any type of expense that the employee would not be required to bear if he or she were free to bring the action in court.” (Armendariz, supra, 24 Cal.4th at pp. 110-111.) But it is still an open question “whether consumers required to arbitrate unwaivable public rights are protected from having to pay any type of expense that they would not be required to bear if they were free to bring the action in court.” (Gutierrez, supra, 114 Cal.App.4th at p. 96, discussing Cruz v. PacifiCare Health Systems, Inc., supra, 30 Cal.4th at p. 317, fn. 3.)
In this case, plaintiffs address both contexts in challenging the provisions requiring advance payment of arbitration costs. As to the first, plaintiffs’ general unconscionability argument is directed to all four agreements, with particular focus on the provision in the C agreement for a three-arbitrator panel, which plaintiffs characterize as “clearly unconscionable and unenforceable.” As to the second, plaintiffs’ claim of statutory violation relies on Civil Code section 798.77, which prohibits the waiver of mobilehome owners’ statutory rights under the Mobilehome Residency Law.
As a matter of judicial restraint, we shall address only the first context. Since this case can be resolved by applying established unconscionability principles, we need not reach plaintiffs’ statutory arguments, which rest on unsettled areas of law.
Under all four agreements at issue here, the costs of arbitration are split evenly between plaintiffs and defendant, and paid in advance. Under the A agreement, a party who fails to pay its share forfeits the right to defend or prosecute the claim. Under the C agreement, which calls for three arbitrators, if either party fails to pay its share, the panel may abate the arbitration or proceed at its discretion.
Plaintiffs’ evidence addressed both costs and affordability. According to the declaration of plaintiffs’ counsel, the fees charged by JAMS’ San Jose office “ranged from a low of $400 per hour to a high of $15,000 per day, depending on the neutral selected. JAMS also charges a case management fee of $275 per party per day up to 30 hours. After 30 hours instead of [the daily fee], each party is required to pay 10% of the total bill as a case management fee.” Many of the plaintiffs’ declarations include this statement: “I cannot afford to advance any costs or pay for arbitration.”
Defendant characterizes plaintiffs’ declarations as insufficient, asserting that plaintiffs “failed to submit any evidence of their income, expenses or savings showing their inability to pay fees at the time they signed the rental agreements.” As defendant points out, in other cases where arbitral costs were found unconscionable, more detailed financial evidence was provided. (See, e.g., Gutierrez, supra, 114 Cal.App.4th at p. 90 [evidence included “a declaration setting forth plaintiffs’ income, expenses and savings”]; Parada, supra, 176 Cal.App.4th at p. 1574 [evidence included plaintiffs’ “income, expenses, and savings”].)
We are not persuaded by defendant’s arguments. Under the circumstances of this case, arbitration appears prohibitively expensive, considering both absolute and relative costs. First, with regard to the absolute cost of JAMS arbitration, plaintiffs’ evidence stands undisputed. (See Parada, supra, 176 Cal.App.4th at pp. 1580-1581 [discussing JAMS fees].) Each plaintiff is required to advance half of that cost under the agreements. Many of the plaintiffs declared that they cannot afford to advance or pay these costs, and those declarations reflect the broader imbalance of economic power in the mobilehome park context. (See Galland v. City of Clovis, supra, 24 Cal.4th at p. 1010.) Second, the relative cost appears excessive in comparison to the amount of plaintiffs’ anticipated recovery. As in Parada, when combined with other factors, “the rates charged by JAMS arbitrators and judges evince a high degree of substantive unconscionability in light of the amount of recovery sought by Petitioners.” (Parada, at p. 1581; Gutierrez, supra, 114 Cal.App.4th at p. 90, fn. 9; Patterson v. ITT Consumer Financial Corp. (1993) 14 Cal.App.4th 1659, 1666.) “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.” (Gutierrez, at p. 90.) That is the case here.
Furthermore, the likelihood that the average mobilehome owner would be able to front half the costs of arbitration through JAMS seems highly unlikely. It also seems highly unlikely that the average mobilehome owner would have an individual claim (e.g., a single backed up sewer or a cracked driveway repair) of such value that it would warrant such a costly arbitration. (See Gutierrez, supra, 114 Cal.App.4th 77.) Although the current claims, collectively, might be of significant value, whether an agreement is unconscionable depends on the circumstances at the time it was made. (Civ. Code, § 1670.5, subd. (a); see O’Hare v. Municipal Resource Consultants, supra, 107 Cal.App.4th at p. 281 [arbitration agreement must be evaluated based on the provisions contained therein at the time it was made, subsequent representations cannot cure facial unconscionability].) The fact that these 41 plaintiffs might be able to come up with a portion of the costs of the arbitration is irrelevant to the issue of whether the arbitration provision was unconscionable as to an individual plaintiff at the time the individual plaintiff entered into his/her rental agreement with MHC. Arbitral costs thus represent another element of substantive unconscionability in this case.
3. Prohibition on Joinder
The D agreement, which affects only one plaintiff, prohibits the joinder of claims by or against residents. Such a prohibition may affect the affordability of arbitration. (Parada, supra, 176 Cal.App.4th at pp. 1573-1574.) It also may affect basic fairness. (Cf., Keating v. Superior Court (1982) 31 Cal.3d 584, 609 [noting “unfairness inherent in forcing hundreds or perhaps thousands, of individuals asserting claims involving common issues of fact and law to litigate them in separate proceedings against a party with vastly superior resources”], reversed in part by Southland Corp. v. Keating (1984) 465 U.S. 1, 17.) In plaintiffs’ view, the anti-joinder provision is “improper” and “extremely prejudicial.”
Without conceding that the provision is unconscionable, defendant acknowledges that “it would make sense to consolidate” the claims of all 41 affected plaintiffs. Defendant further notes that the D agreement contains a severance provision allowing the offending provision to be excised from the contract. Defendant also asserts that “the issue is really moot” since all of the claims were joined in a single lawsuit and addressed in a single motion to compel arbitration.
We conclude that the anti-joinder provision adds an element of substantive unconscionability, but its effect is minor in this case because the provision affects only one plaintiff.
4. Notice Requirements
Plaintiffs challenge provisions in the A and D agreements that require notice of residents’ failure-to-maintain claims. Plaintiffs contend that those contract provisions are unconscionable, because they conflict with statutory notice provisions. Under the statute, the notice must include “the basis of the claim, the specific allegations, and the remedies requested.” (Civ. Code, § 798.84, subd. (b).) Under the challenged contract provisions, the notice must include “a description of the dispute” as well as “facts from which the dispute arises, including witnesses, dates, times, and circumstances” and “a description of the relief or action requested.” In plaintiffs’ view, the contract notice provisions are more burdensome than the statutory notice provisions in two ways: (1) the contract provisions require more detail than the statute, and (2) under the contract provisions, each homeowner must give notice, whereas under the statute, “notice by one homeowner shall be deemed to be sufficient notice of the specific allegation to the management of the park by all of the homeowners in the park.” (Ibid.)
The relevant statutory provision is Civil Code section 798.84, which states in pertinent part: “(a) No action based upon the management’s alleged failure to maintain the physical improvements in the common facilities in good working order or condition or alleged reduction of service may be commenced by a homeowner unless the management has been given at least 30 days’ prior notice of the intention to commence the action. [¶] (b) The notice shall be in writing, signed by the homeowner or homeowners making the allegations, and shall notify the management of the basis of the claim, the specific allegations, and the remedies requested. A notice by one homeowner shall be deemed to be sufficient notice of the specific allegation to the management of the park by all of the homeowners in the park.”
Defendant disagrees. In its view, the contract notice requirements are “quite similar” to the statutory notice requirements and they put “no additional burden” on plaintiffs.
We conclude that the contractual notice requirements are only slightly more burdensome than the statutory requirements and, therefore, do not materially impact the unconscionability analysis.
C. Sliding Scale
Using a “sliding scale” approach, we balance substantive and procedural unconscionability. (Armendariz, supra, 24 Cal.4th at p. 114.) In this case, there is a high degree of substantive unconscionability, principally based on the lack of mutuality. The agreements are “unfairly one-sided.” (Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1071.) They compel arbitration of plaintiffs’ likely claims while exempting defendant’s likely claims. (Abramson, supra, 115 Cal.App.4th at p. 665.) Additionally, arbitration is prohibitively expensive to these plaintiffs. (Parada, supra, 176 Cal.App.4th at pp. 1574, 1585.) There is also a strong showing of procedural unconscionability. The agreements are adhesive. (Armendariz, at p. 115.) There is an element of surprise, since certain arbitration provisions were beyond plaintiffs’ reasonable expectations. (Bruni v. Didion, supra, 160 Cal.App.4th at p. 1277.) That includes the high cost of arbitration, the provision in the D agreement prohibiting joinder, and the provision in the C agreement requiring three arbitrators. (Parada, supra, 176 Cal.App.4th at p. 1571.) There are also elements of oppression, given the lack of opportunity for real negotiation or meaningful choice. (Gutierrez, supra, 114 Cal.App.4th at p. 87.) Additionally, oppression is evidenced by plaintiffs’ economic pressure to sign the agreements. (Armendariz, at p. 115.) “Considering both substantive unconscionability, which is demonstrated by the extremely one-sided nature of the arbitration provision at issue in this case, and procedural unconscionability, which results from the high degree of oppressiveness, we find the agreement to arbitrate unconscionable as a matter of law.” (Abramson, at p. 666.)
D. Severability
We next consider whether the unconscionable provisions can be severed. As provided in Civil Code section 1670.5, subdivision (a): “If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.”
There is a “strong legislative and judicial preference” for severing unconscionable terms and enforcing the rest of the agreement. (Roman, supra, 172 Cal.App.4th at p. 1477.) If “the unconscionability or illegality is collateral to the main purpose of the contract, and the offending provisions can be excised from the contract by means of severance or limitation, then the remainder of the contract can be enforced.” (Mercuro v. Superior Court, supra, 96 Cal.App.4th at pp. 184-185.) Courts generally refuse enforcement only when the “agreement is ‘permeated’ by unconscionability.” (Armendariz, supra, 24 Cal.4th at p. 122.)
In Armendariz, the court identified two factors weighing against severance of the unconscionable provisions there. (Armendariz, supra, 24 Cal.4th at p. 124.) First, the challenged agreement contained more than one objectionable term, which was indicative of “a systematic effort to impose arbitration... as an inferior forum that works to the employer’s advantage.” (Ibid.) “Second, in the case of the agreement’s lack of mutuality, 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.” (Id. at pp. 124-125.)
Both of the Armendariz factors are present here.
First, there is more than one provision here that is substantively unconscionable. (Armendariz, supra, 24 Cal.4th at p. 124.) The objectionable terms include the cost provisions and the anti-joinder provision in the D agreement. But the principal defect, which affects all four agreements, is the lack of mutuality reflected in the forum choice provisions.
Second, there is no way to “remove the unconscionable taint from the agreement” without reformation. (Armendariz, supra, 24 Cal.4th at p. 125.) The fundamental defect in these agreements is lack of mutuality, which cannot be cured by severance alone. (Ibid.; cf., Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1075 [“the offending provision can be severed and the rest of the arbitration agreement left intact”].) If the offending provisions are removed, “there would be virtually nothing of substance left to the contract.” (Mercuro v. Superior Court, supra, 96 Cal.App.4th at p. 185; Abramson, supra, 115 Cal.App.4th at p. 667.)
To sum up, the arbitration agreements are permeated with unconscionability and cannot be enforced. Having resolved the parties’ dispute over arbitration on the ground of unconscionability, we need not and do not reach plaintiffs’ other challenges to the arbitration provisions, which include voidness and the risk of inconsistent rulings. Since there is no enforceable agreement to arbitrate plaintiffs’ claims, defendant’s motion to compel must be denied. That conclusion brings us to the question of whether the alternative judicial reference provisions are enforceable.
Judicial Reference
As before, we begin our analysis by summarizing the governing legal principles.
I. Legal Principles
“There are two kinds of references authorized by statute: general and special.” (De Guere v. Universal City Studios, Inc. (1997) 56 Cal.App.4th 482, 496.) “[A] general reference has binding effect, but must be consensual, whereas a special reference may be ordered without consent but is merely advisory, not binding on the superior court.” (Aetna Life Ins. Co. v. Superior Court (1986) 182 Cal.App.3d 431, 436; Jovine v. FHP, Inc. (1998) 64 Cal.App.4th 1506, 1523.)
The authorizing statutes are contained in the Code of Civil Procedure. “A ‘general’ reference is conducted pursuant to section 638, subdivision [(a)]: the referee is empowered to make a conclusive determination without further action by the court.” (Ruisi v. Thieriot (1997) 53 Cal.App.4th 1197, 1208.) “A ‘special’ reference is one conducted pursuant to section 639 or subdivision [(b)] of section 638, in which the referee makes advisory findings which do not become binding unless adopted by the court.” (Ibid.)
The reference provisions are found in Code of Civil Procedure part 2, title 8, chapter 6, which is entitled: “Of References and Trials by Referees.” Defendant sought an order of reference under the first two provisions of that chapter, sections 638 and 639.
Agreements to submit disputes to judicial reference may be voided on grounds of unconscionability. (Pardee Construction Co. v. Superior Court, supra, 100 Cal.App.4th at p. 1088.) In such cases, the pertinent question “is whether the provision is both procedurally and substantively unconscionable.” (Trend Homes, Inc. v. Superior Court, (2005) 131 Cal.App.4th 950, 957, disapproved on another point in Tarrant Bell Property, LLC v. Superior Court (2011) 51 Cal.4th 538, 547, fn.5.) “The validity and enforceability of a judicial reference provision... must be determined on a case-by-case basis.” (Id. at p. 956.)
II. Analysis
As we now explain, the judicial reference provisions in the lease and rental agreements challenged here are unenforceable for the same reasons as the arbitration provisions in those agreements: They are procedurally and substantively unconscionable and the defects cannot be cured by severance.
A. Unconscionability
First, the provisions are procedurally unconscionable. As discussed above, the agreements are contracts of adhesion. (See Pardee Construction Co. v. Superior Court, supra, 100 Cal.App.4th at p. 1086.) “With respect to the oppression component of procedural unconscionability, the parties had unequal bargaining power.” (Pardee Construction Co. v. Superior Court, at p. 1089; see also Gutierrez, supra, 114 Cal.App.4th at p. 87; Parada, supra, 176 Cal.App.4th at p. 1572.) Additionally, plaintiffs were under economic pressure to sign the agreements. (Armendariz, supra, 24 Cal.4th at p. 115.) Furthermore, “the agreements omitted mention of the economically significant matter of referee’s fees.” (Pardee Construction Co. v. Superior Court, at p. 1090.)
Next, the provisions are substantively unconscionable because they are “unfairly one-sided.” (Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at p. 1071.) Under the challenged provisions of all four types of agreements at issue here, “all arbitrable issues” are subject to judicial reference. As explained above, only plaintiffs’ likely claims against defendant fall within that category. (See Abramson, supra, 115 Cal.App.4th at p. 665.) Thus, just like the arbitration provisions, the judicial reference provisions lack mutuality. (Ibid.)
B. Severability
As with the offending arbitration provisions, the unconscionable judicial reference provisions cannot be severed. There is no way to “remove the unconscionable taint” of the judicial reference provisions without reformation. (Armendariz, supra, 24 Cal.4th at p. 125.) The fundamental defect is lack of mutuality, which cannot be cured by severance. (Ibid.)
For all of these reasons, the judicial reference provisions are not enforceable.
DISPOSITION
The petition for writ of mandate is granted. Let a peremptory writ of mandate issue directing respondent court (1) to vacate its order of October 8, 2009, which granted defendant’s motion to compel arbitration; (2) to enter a new and different order denying both the motion to compel arbitration and the alternative motion to compel a judicial reference; and (3) to restore this matter to its litigation calendar for further proceedings. This court’s temporary stay order is vacated. Costs in this original proceeding are awarded to plaintiffs/petitioners.
WE CONCUR: Bamattre-Manoukian, Acting P. J., Duffy, J.
Code of Civil Procedure section 638 provides in pertinent part: “A referee may be appointed upon the agreement of the parties filed with the clerk, or judge, or entered in the minutes, or upon the motion of a party to a written contract or lease that provides that any controversy arising therefrom shall be heard by a referee if the court finds a reference agreement exists between the parties: [¶] (a) To hear and determine any or all of the issues in an action or proceeding, whether of fact or of law, and to report a statement of decision. [¶] (b) To ascertain a fact necessary to enable the court to determine an action or proceeding.”
Code of Civil Procedure section 639 provides in pertinent part: “(a) When the parties do not consent, the court may, upon the written motion of any party, or of its own motion, appoint a referee in the following cases pursuant to the provisions of subdivision (b) of Section 640: [¶] (1) When the trial of an issue of fact requires the examination of a long account on either side; in which case the referees may be directed to hear and decide the whole issue, or report upon any specific question of fact involved therein. [¶] (2) When the taking of an account is necessary for the information of the court before judgment, or for carrying a judgment or order into effect.”