SANCHEZ v. VALENCIA HOLDING COMPANY

Respondent’s Reply to Supplemental Brief

Cal.March 19, 2014

Rosner, Barry & Babbitt, LLP’s ont pprarage SUPREME COURTSUPREM = ©RT COPY =) “LED . AUTS MAR 192014 FRAUD Frank a. MeGuire Clerk LEGAL CENTER ee —_ Because nobody should be cheated. ™ Deputy 10085 Carroll Canyon Road, Suite 100, San Diego, CA 92131, Tel (858) 348-1005, (800) 466-5366, FAX (858) 348-1150 March18, 2014 Supreme Courtof California 350 McAllister Street San Francisco, CA 94102-4797 Re: Sanchez v. Valencia Holding Co., LLC Case No. $199119 Responseto Appellants’ Supplemental Brief and Amicus Supplemental Briefs Dear Honorable Justices: In response to Appellants’ Supplemental Brief, and the various Amicus Supplemental Briefs, Respondent Gil Sanchez submits the followingletter brief: I. Introduction In Respondent’s Supplemental Brief, Respondent argued Corporate America wants to know how manyrights they can deprive their customersof. Respondent’s Supplemental Brief suggested a substantive unconscionability test using a “shocks the conscience” formulation was a license for Corporate America to take awayall rights from consumers in adhesion contracts. Respondent argued the sky wasfalling on consumers, one contractualclauseat a time. The Supplemental Briefs submitted by Appellants, the Association of Southern California Defense Council (“SCDC”), the Pacific Law Foundation (“PLF”), and Federated Insurance demonstrate Respondentwasneitherhysterical nor mistaken. The “shocks the conscience” standard these groups advocate eliminates the unconscionability defense. All agree that a “shock the conscience” standardis as extreme as possibly can be created. This is not an arbitration issue; Rosner, Barry & Babbitt, LLP www.autofraudlegalcenter.com Re: Sanchez v. Valencia Holding Co., LLC Case No. $199119 Page 2 this is an issue of basic contract law. Welive in a society where form adhesion contracts govern our everydaylives. The supplementalbriefs espouse a country for the corporation, by the corporation, and run by the corporation. II. Since Consciences Can’t Be Shocked, “Shocks the Conscience”Is a Meaningless Standard Whatdoesit meanto “shock the conscience”? Justice Scalia, in evaluating the “shocks the conscience”test used in substantive due processanalysis, referred to the test as the ne plus ultra, the Napoleon Brandy, the Mahatma Gandhi, the Cellophane of subjectivity ....” (County ofSacramento v. Lewis (1998) 523 U.S. 833, 861.) For arbitration clauses, however, there will be no subjectivity because there is no way to “shock the conscience.” Appellants invite this Court to travel back in time to 1750 and adoptthe unconscionability standard used in England in Earl ofChesterfield v. Jansson (Ch. 1750): “Such as no man inhis senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.” Appellants urge this Court to adopt a stricter less consumer friendly approach than 1750 England. Even when reasonable people would find a clause “repugnant,” the clause should still be upheld unless “all or nearly all” people would agree. Appellants simply seek a license to include whatever they wantinto all forms of adhesion contracts. The PLFasks this Court to create a “certainty” standard andtheir proposal to use a “shock the conscience” standard as they defineit, would dojust that. Such a standard would makeit “certain” that virtually no consumercontract, no matter how procedurally unconscionable, would ever be invalidated or held substantially unconscionable. PLF proposes only contracts that “no man in his senses and not Re: Sanchez v. Valencia Holding Co., LLC Case No. $199119 Page 3 under delusion would make.” Only certain clauses that are “monstrous and extravagant” would not be enforced. SCDC appears to argue that clauses that would be unconscionable in any other contractual setting should be upheldif an arbitration clause is at issue. The proposals set forth are a dream list for Corporate America. SCDCproposesthatall burdens be placed on the consumer, with a “strong presumption” against the consumer which mustbe rebutted by clear and convincing evidence so as to prove the clause “is so one sided as to shock the conscience.” (Proposal 2, at page 3. Further, consumers need never be shown orever be awareofthe arbitration clause, or even sign the clause. The clause should be allowedto obligate the consumer to pay one-half of the arbitration costs, and the adhesive nature of the clause should not be considered. (Proposals 3, 4, 5 at pages 2-3.) Finally, Federated argues for a “shocks the conscience” test rooted in morality and a sense of right and wrong. Despite providing the definition of unconscionable from the Oxford English Dictionary to include “not in accordance with whatis right or reasonable,” Federated argues a clause is only substantively unconscionable if it is so “grotesquely one sided that a judge looking at the agreementcan only shakehis or her headat the objective, morally offensive term or contract, and find it shocking or offensive to ‘the sense of right and wrong as regards things for which oneis responsible.” In this case, Mr. Sanchez was sold an accident-damaged, unsafe vehicle despite being promisedthe vehicle was “certified” and inspected. Does thefact a car dealership tried to cheat him “shock the conscience”? No,car dealers have been cheating people a long time. Doesit “shock the conscience”that a car dealer would try and minimizeits liability by stealing away Mr. Sanchez’s right to a jury trial? Not really. But, would an “honest andfair”or “right or reasonable” businesstry to Re: Sanchez v. Valencia Holding Co., LLC Case No. S199119 Page 4 limit its exposure andliability, by taking awaythe right to a jury oraccessto class action lawsuits? And would an “honestandfair” business try to take away those rights by putting them on the back of an adhesion contract that is not discussed with its customers? Of course not. But car dealers are not known for being “honest andfair.” (See Gallup Honesty and Ethics Poll, December 2013 (9% of Americansrated the honesty and ethics of car dealers as “very high” or “high”).) In fact, car dealers successfully lobbied Congress to make pre-dispute arbitration clauses in motor vehicle franchise contracts unenforceable under the Federal Arbitration Act unless both parties consent after the dispute arises. (See Motor Vehicle Franchise Contract Arbitration Fairness Act of 2002 (Pub.L. 107-273 (amendmentto the Automobile Dealers’ Day in Court Act in 2002).) How exactly is the “honest andfair” car dealer exempt from mandatory arbitration clauses for disputes with manufacturers, but able to force consumers to be boundby such clauses? Whenan industry held in such low regard does anything, even engaging in conductit itself deems unfair as applied to it, how canit really be labeled to “shock the conscience”? Here,if the Court adopts a “shocks the conscience”definition of substantive unconscionability in form adhesion contracts, Corporate America wins andit is open season on consumerrights. We will not have arbitration clauses such as found in the Concepcion case. Rather, dealers will start with the agreement on the back of Mr. Sanchez’s contract and makeit as one-sided and unfair as possible. Whynottake awaythe rights provided by consumerprotection statutes such as the Consumers Legal Remedies Act and the Automobile Sales Finance Act under the guise of creating an arbitration clause to resolve disputes? Why botherputting the arbitration clause on the back of the contractat all? As long as at least one person does notfind such clauses repugnant — they will not be unconscionable. And since Re: Sanchez v. Valencia Holding Co., LLC Case No. S199119 Page 5 one person didn’t find the clauses repugnant — the business whoincluded the clause — the “shocks the conscience”test could neverbesatisfied. HI. Conclusion The relationship between consumers and businesses using form adhesion contracts is not the relationship most contract law grew up to govern. Form adhesion contracts are not agreementsin thesense theparties agreed on the terms. If consumers want to purchase products, havehealth care,utilities, credit cards, etc., they must accept the dictated terms. In the context of an adhesion form contract, the “shocks the conscience” tests proposed in the supplementalbriefing destroy consumerrights. It could not be clearer — Corporate America seeks a standard so impossible to establish that challenges on the ground of unconscionability will seldom,if ever, be brought. One can only imagine howfar these new adhesion contracts will go. Respondent previously analogized this dispute to making sure David has fighting chance against Goliath. Based on the supplemental briefs submitted, it appears Goliath not only wishes to prohibit slingshots, but to strap David to a table and crush his skull with a boulder. If Goliath enters into a contract with Goliath (Apple and Microsoft), a different standard should apply, than the case of consumer adhesion contracts. All of the groups advocating “shocks the conscience” support elimination of even considering “procedural unconscionability.” Sincerely yours, Hatien D. Rosner cc: See Attached Proof of Service PROOF OF SERVICE Gil Sanchez v. Valencia Holding Company, LLCetal. California Supreme Court Case No. SI99119 Court ofAppeal, State ofCalifornia, SecondAppellate District, Division One B228027 Los Angeles Superior Court Case No. BC433634 Iam employedin the County of San Diego,State of California. I am over the age of 18 and not party to the within action. My business address is: 10085 Carroll Canyon Road, Suite 100, San Diego, California 92131. On March 18, 2014, I served the foregoing document(s) describedas: LETTER BRIEF DATED MARCH18, 2014 on theinterestedparties in this action by mail at San Diego, California addressed as follows: [X] BYU.S. MAIL: I enclosed the documents in a sealed envelope or package addressedto the personsat the addresses listed above and: (1) [] deposited the sealed envelope with the United States Postal Service, with the postage fully prepaid. (2) [X] placed the envelope for collection and mailing, following our ordinary business practices, I am readily familiar with the business’s practice for collecting and processing correspondence for mailing. Under that practice, on the same day that correspondenceis placed for collection and mailing, it is deposited in the ordinary course ofbusiness with the United States Postal Service, in a sealed envelope with postage thereon fully prepaid, at San Diego, California. I am awarethat on motion ofthe party served,service is presumedinvalid if postal cancellation date or postage meter date is more than one day after date of deposit for mailing in affidavit. [X] (STATE)I declare underpenalty ofperjury underthe lawsofthe State ofCalifornia that the aboveis true and correct. Executed on March18, 2014, at San Diego, California. we Srooken. wr Amie Ipatenco Gil Sanchez vy. Valencia Holding Company, LLCetal. California Supreme Court Case No. S199119 Court ofAppeal, State ofCalifornia, SecondAppellate District, Division One B228027 Los Angeles Superior Court Case No. BC433634 SERVICE LIST Kellie Christianson, Esq. Atkinson, Andelson, Loya, Ruud & Romo 20 Pacifica, Suite 400 Irvine, CA 92618 Attorneys for Valencia Holding Company LLC dba Mercedes-Benz of Valencia Robert A. Olson, Esq. Edward L. Xanders, Esq. Greines, Martin, Stein & Richland LLP 5900 Wilshire Blvd., 12th Floor Los Angeles, CA 90036 Attorneys for Valencia Holding Company LLC dba Mercedes-Benz of Valencia Jon D. Universal, Esq. Universal, Shannon & Wheeler 2240 Douglas Blvd., Suite 290 Roseville, CA 95661 Attorneys for Mercedes Benz USA, LLC Steve Mikhov,Esq. RomanoStancroff& Mikhov 640 S. San Vicente, Suite 350 Los Angeles, CA 90048 Attorneys for Plaintiff Gil Sanchez Office of the District Attorney Service Pursuantto for Los Angeles County Business & Professions Appellate Division Code § 17209 320 W. Temple Street, Room 540 Los Angeles, CA 90012 Gil Sanchez v. Valencia Holding Company, LLCet al. California Supreme Court Case No. S199119 Court ofAppeal, State of California, SecondAppellate District, Division One B228027 Los Angeles Superior Court Case No. BC433634 SERVICE LIST Deputy Attorney General Service Pursuant to State of California, Departmentof Justice Business & Professions 300 S. Spring Street Code § 17209 Los Angeles, CA 90013-1230 Hon. Rex Heeseman Superior Court of California County of Los Angeles Los Angeles Superior Court 111 N. Hill Street Los Angeles, CA 90012 Lisa Perrochet, Esq. Felix Shafir, Esq. John F, Querio, Esq. Horovitz & Levy LLP 15760 Ventura Blvd., 18" Floor Encino, CA 91436-3000 Attorneys for California New Car Dealers Association J. Alan Warfield, Esq. McKenna Long & Aldridge LLP 300 South Grand Avenue, 14" Floor Los Angeles, CA 90071 Attorneys for Association of Southern California Defense Counsel Clerk California Court of Appeal Second District, Division One 300 South Spring Street Los Angeles, CA 90013 (4 copies) Richard J. Simmons,Esq. Karin Dougan Vogel, Esq. Matthew M.Sonne,Esq. Sheppard Mullin Richter & Hampton 650 Town Center Drive, 4" Floor Costa Mesa, CA 92626 Attorneys for Employers Group Gil Sanchez v. Valencia Holding Company, LLCetal. California Supreme Court Case No. S199119 Court ofAppeal, State of California, Second Appellate District, Division One B228027 Los Angeles Superior Court Case No. BC433634 SERVICE LIST Deborah J. La Fetra, Esq. Pacific Legal Foundation 930 G Street Sacramento, CA 95814 Attorneys for Pacific Legal Foundation Richard M.Segal, Esq. Nathaniel R. Smith, Esq. Pillsbury Winthrop Shaw Pittman 501 W. Broadway,Suite 1100 San Diego, CA 92101 Attorneys for Nissan Motor Acceptance Corporation Henry D. Lederman,Esq. Alexa L. Woerner, Esq. Littler Mendelson 1255 Treat Blvd., Suite 600 Walnut Creek, CA 94597 Attorneys for Volt Management Corp. and Volt Information Sciences,Inc. Jan T. Chilton, Esq. Donald J. Querio, Esq. Severson & Werson One Embarcadero Center, Suite 2600 San Francisco, CA 94111 Attorneys for American Financial Services Association, California Bankers Association, and California Financial Services Association Anna 8S. McLean,Esq. Sheppard Mullin Richter & Hampton Four Embarcardero Center, 17" Floor San Francisco, CA 94111 Attorneys for Toyota Motor Credit Corporation and General Motors Financial Company,Inc. Gil Sanchez v. Valencia Holding Company, LLCetal. California Supreme Court Case No. S199119 Court ofAppeal, State of California, SecondAppellate District, Division One B228027 Los Angeles Superior Court Case No. BC433634 SERVICE LIST Aimee Feinberg, Esq. California Supreme Court Clinic University of California, Davis School of Law 400 Mrak Hall Drive Davis, CA 95616 Attorneys for Consumers for Auto Reliability and Safety Mark A. Chavez, Esq. Nance F. Becker, Esq. Chavez & Gertler 42 Miller Avenue Mill Valley, CA 94941 Attorneys for Arthur Lovett Donald M.Falk, Esq. Mayer Brown Two Palo Alto Square, Suite 300 Palo Alto, CA 94306 Attorneys for The Chamber of Commerce of the United States of America, The Association of Global Automakers,Inc., and The Alliance of Automobile Manufacturers Brian J. Wong, Esq. Mayer Brown 1999 K. Street NW Washington, DC 20006 Attorneys for The Chamber of Commerce of the United States of America, The Association of Global Automakers,Inc., and The Alliance of Automobile Manufacturers Erica C. Frank, Esq. 1215 K Street, Suite 1400 Sacramento, CA 95814 Attorneys for The California Chamber of Commerce Gil Sanchez v. Valencia Holding Company, LLCetal. California Supreme Court Case No. S199119 Court ofAppeal, State ofCalifornia, SecondAppellate District, Division One B228027 Los Angeles Superior Court Case No. BC433634 SERVICE LIST Fred J. Hiestand, Esq. 2001 P Street, Suite 110 Sacramento, CA 95811 Attorneys for The Civil Justice Association of California Gretchen M.Nelson, Esq. Jacob H. Mensch,Esq. Kreindler & Kreindler 707 Wilshire Blvd., Suite 4100 Los Angeles, CA 90017 Attorneys for Consumer Attorneys of California