When can an unconscionable attorney fees and costs provision be severed from an arbitration agreement?

California, United States of America


The following excerpt is from Serafin v. Balco Props. Ltd., 185 Cal.Rptr.3d 151, 235 Cal.App.4th 165 (Cal. App. 2015):

Serafin has failed to show that unconscionability so permeates the arbitration agreement that the flawed attorney fees and costs provision could not be severed and the balance of the agreement enforced. We note that other courts have severed similar unconscionable arbitration provisions and enforced the rest of the arbitration agreement. (See Serpa, supra, 215 Cal.App.4th at p. 710, 155 Cal.Rptr.3d 506 [offending attorney fees provision (identical to the one here) severed as it is plainly collateral to the main purpose of the contract and remainder of arbitration agreement enforced]; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 92, 7 Cal.Rptr.3d 267 [endorsing severing arbitration costs provision and enforcing the balance of the agreement; the central purpose of the arbitration agreement was not to regulate costs, but to provide a mechanism to resolve disputes [and] [b]ecause the costs provision is collateral to that purpose, severance was available (citation omitted) ].) Consequently, we find that the severance of the offending attorney fees provision was within the discretion of the trial court.

Serafin lastly claims the arbitration agreement improperly denied her right to judicial review. Although Serafin fails to develop this argument, she presumably is referring to language in the arbitration agreement indicating that the decision of the arbitrator will be final and binding. However, the final and binding language of the arbitration agreement does not preclude judicial review of an arbitration award pursuant to Code of Civil Procedure sections 1286.2 and 1286.6. (Corona v. Amherst Partners (2003) 107 Cal.App.4th 701, 705, 132 Cal.Rptr.2d 250 [where parties expressly agree arbitration award will be final and binding, they are deemed to agree to limited judicial review of award by implication].)

[235 Cal.App.4th 185]

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