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Formalism and Functionalism in California’s Unconscionability Doctrine: An Analysis of Fuentes v. Empire Nissan, Inc.
By David Beglin, J.D., Berkeley Law, Class of ‘24 | Student Scholarship Series (July 2024)
In Fuentes v. Empire Nissan, Inc., a case currently pending in the California Supreme Court, the underlying appellate court decision ruled that an employment arbitration agreement was not unconscionable and was enforceable, despite significant abuses in how the contract was formed. Fuentes reveals a tension in California’s unconscionability jurisprudence that exists between a formalistic versus functionalist approach. Finding a contract unenforceable under the unconscionability doctrine requires a showing of both unconscionability in how a contract was formed (“procedural unconscionability”) and unconscionability in the terms of the agreement itself (“substantive unconscionability”). Taking a formalistic approach, the Fuentes court views procedural and substantive unconscionability as conceptually distinct inquiries that must be treated independently. But California courts must analyze unconscionability on a sliding scale: they must assess unconscionability on balance, allowing significant procedural unfairness to compensate for less significant substantive unfairness, and vice versa. This sliding-scale aspect of California’s unconscionability jurisprudence is functional. It recognizes that procedural and substantive unfairness are intertwined and that the unconscionability analysis must be holistic. This Note argues that the California Supreme Court should reject the Fuentes court’s formalism and embrace the sliding-scale approach’s functionalism.