In Fuentes v. Empire Nissan, Inc., a discharged employee sued in a Superior Court, arguing that the arbitration agreement was unconscionable. The trial court sided in her favor, only to be reversed by the California Court of Appeal in 2023, which in turn was reversed by the California Supreme Court. Now the plaintiff needs to start over.
Seldom has any case focused so much on a contract’s cosmetics as Fuentes. To the California Supreme Court, “[t]he document is printed in a very small font and its text is so blurry and broken up that it is nearly unreadable.”[1] The Court of Appeal was so struck that it uploaded the contract’s photocopy from the court record as an appendix to the opinion to demonstrate its lamentable quality. It is reproduced at the end of this article as well (without shrinking). The Supreme Court noted that its difficulty was not merely aesthetic. “[T]he arbitration agreement consists of a mammoth paragraph consisting of something like 900 words, with 35 lines squeezed into about three vertical inches of text. One sentence, by itself, is 214 words long.”[2] Its state was such that the Supreme Court suggested legislative reform as a cure.[3]
As if to craft an ideal law school exam question, the circumstances of its signing were no less dubious. This document was but one component in an employment application packet for which the plaintiff was given five minutes to complete. It was a race:
She was told that the documents in the packet had to do with her employment application, contacting her references, and a drug testing requirement, that she had to complete the documents to work for Empire Nissan, and that she should hurry because the drug testing facility was about to close. She was not offered an opportunity to ask questions. She did not receive a copy.[4]
The question was whether this contract is unconscionable.
“A contract is unconscionable if one of the parties lacked a meaningful choice in deciding whether to agree and the contract contains terms that are unreasonably favorable to the other party.”[5] This test is divided into procedural unconscionability and substantive unconscionability. “The procedural element concerns the circumstances of contract negotiation and formation, particularly oppression or surprise due to unequal bargaining power. The substantive element, by contrast, concerns the fairness of an agreement’s actual terms, i.e., whether those terms are overly harsh or one-sided.”[6] These components are weighed in “a sliding scale analysis under which the more substantively oppressive a term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”[7] If unconscionability is a large explosion of two hazardous chemicals of equal combustibility, both must be present regardless of either chemical’s amount. However, the explosion’s size is still dependent on the mass of both chemicals, regardless of the proportion therein.
Clearly, this case featured “a contract of adhesion, i.e., a standardized contract which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.”[8] “Some procedural unconscionability” is present in every contract of adhesion.[9] “[O]rdinary contracts of adhesion are indispensable facts of modern life that are generally enforced.”[10] Nevertheless, “[b]ecause contracts of adhesion are not the result of freedom or equality of bargaining, we examine them carefully.”[11] The power disparity between employer and employee, the small font, the blurry font, the linguistic complexity, the misinformation provided to the plaintiff, the brief amount of time to review the contract, and the failure to provide a copy of the contract to the plaintiff all supported a finding of extraordinary procedural unconscionability. Since “the agreement involved such a high degree of procedural unconscionability, even a low degree of substantive unconscionability may render the agreement unenforceable.”[12]
The next question was whether the contract was substantively unconscionable. Terms that are “overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided” are substantively unconscionable.[13] Fuentes v. Empire Nissan, Inc. was decided in the shade of OTO, L.L.C. v. Kho, another case regarding the unconscionability of an employee’s arbitration agreement with the employer.[14] Kho held that substantively unconscionable contracts “may include fine-print terms, unreasonably or unexpectedly harsh terms regarding price or other central aspects of the transaction, and terms that undermine the nondrafting party’s reasonable expectations.”[15] An appellate case, Davis v. TWC Dealer Group, Inc., interpreted Kho’s “fine-print terms” to mean terms “so small as to challenge the limits of legibility.”[16] Thus, Davis held, illegibility is a factor for substantive unconscionability. Fuentes clarified that the California Supreme Court meant “substantively unfair or one-sided terms hidden in a legal document,” by “fine-print terms.”[17] “Such terms may be hidden in a variety of ways, including by printing them in text that is smaller than the surrounding text, burying them in a large block of text, or placing them in a part of the document likely to be overlooked.”[18] The Court explained that Kho quoted from Sonic-Calabasas A, Inc. v. Moreno, which quoted from a secondary source, “Williston on Contracts.”[19] “The Williston treatise observes that contract terms ‘whether in fine print or legal ‘gobbledygook’ would hardly be of concern unless they were substantively harmful to the nondrafting party as well.’”[20] This observation was neither in Sonic-Calabasas nor Kho. Yet “[t]his context makes clear that we did not mean by our reference to ‘fine-print terms’ in Kho that a contractual term could be substantively unconscionable merely because it was printed in a small font.”[21]
Using unquoted language in a secondary source to explain what a court meant by the secondary source’s quoted language may be risky, but it was obvious to Fuentes. Kho, a case regarding a contract with small font,also had a brief nonexclusive list for procedural unconscionability, yet it did not include the font size in that list.[22] For its part, Black’s Law Dictionary defines “fine print” as: “The part of an agreement or document — usu. in small, light print that is not easily noticeable — referring to disclaimers, restrictions, or limitations.”[23] Merely being a disclaimer, restriction, or limitation does not make a term substantively unconscionable—all contracts are limited. The Court did not offer its own definition of “fine print.” Ultimately, “because font size does not affect the substance of an agreement’s terms, it cannot render a contractual term substantively unconscionable.”[24]
Some time after signing the arbitration agreement, the plaintiff signed two confidentiality agreements with her employer. These agreements provided that the employer “may seek any remedies available at law or in equity and that the prevailing party in a ‘legal action’ to enforce the agreements may recover attorney fees and costs.”[25] The Court held that “legal action” meant a judicial proceeding. “Most significantly, the confidentiality agreements make no reference to arbitration,” which “suggests that, at the time of their signing, the parties did not intend for claims under them to be subject to mandatory arbitration.”[26] Nevertheless, the arbitration agreement required any amendment to be signed by the president of the employer, and the confidentiality agreements allegedly lacked any such signature. The Court of Appeal took that allegation along with the notion that “the law strongly favors” arbitration to hold that the arbitration agreement remained intact.[27] “The Court of Appeal’s reliance on the policy favoring arbitration as an interpretive presumption was misplaced.”[28] Such a policy merely provides an “equal treatment principle” ensuring that arbitration agreements “are treated like other contracts.”[29] The Court seemingly redefined the meaning of “favoring.”
In addition, “[t]he Court of Appeal relied on the lack of signature without a factual record to support that conclusion.”[30] Therefore, the case was remanded. The sole dissenter to the majority opinion vigorously opposed this decision because the plaintiff did not make this argument before the Court (although she did so in the trial court), even though the employer “waived any argument that its president did not sign the agreement by failing to make that argument in the trial court.”[31] The majority opinion simply thought it proper for the factual question regarding the signatures to be answered in the trial court. In addition, the majority opinion noted the argument that the plaintiff could not have assented to the contract because it was so illegible. However, the trial court did not rule on this question. On remand, “the trial court may, in its discretion, allow the parties to submit additional briefing on the relationship between legibility and mutual assent. We express no view on this subject.”[32]
If you are concerned that a contract may be unconscionable, please call 916-822-8700 or email info@lawburton.com.
[1] Fuentes v. Empire Nissan, Inc., 19 Cal. 5th 93, 100 (2026).
[2] Id. at 105(omitting internal quotation marks and citation).
[3] “The Legislature may wish to consider specifying requirements for employment contracts that promote legibility and comprehensibility, as it has with other types of contracts.” Id. at 105 n.2.
[4] Id. at 100.
[5] Id. at 102-103.
[6] Id. at 103(omitting internal quotation marks and citation).
[7] Id.
[8] Id.
[9] Id.
[10] Id. at 103-104.
[11] Id. at 104(omitting internal quotation marks).
[12] Id. at 105.
[13] Id. at 106(omitting internal citations and quotation marks).
[14] OTO, L.L.C. v. Kho, 8 Cal. 5th 111, 121 (2019).
[15] Id. at 130(emphasis added).
[16] Davis v. TWC Dealer Grp., Inc., 41 Cal. App. 5th 662, 674 (2019).
[17] Fuentes v. Empire Nissan, Inc., 19 Cal. 5th 93, 107 (2026).
[18] Id.
[19] Sonic-Calabasas A, Inc. v. Moreno, 57 Cal. 4th 1109, 1145 (2013).
[20] Fuentes v. Empire Nissan, Inc., 19 Cal. 5th 93, 107 (2026).
[21] Id.
[22] “The circumstances relevant to establishing oppression include, but are not limited to (1) the amount of time the party is given to consider the proposed contract; (2) the amount and type of pressure exerted on the party to sign the proposed contract; (3) the length of the proposed contract and the length and complexity of the challenged provision; (4) the education and experience of the party; and (5) whether the party’s review of the proposed contract was aided by an attorney.” OTO, L.L.C. v. Kho, 8 Cal. 5th 111, 126-27 (2019)(quoting Grand Prospect Partners, L.P. v. Ross Dress for Less, Inc., 232 Cal. App. 4th 1332, 1348 (2015)).
[23] Black’s Law Dictionary (8th ed. 2004).
[24] Fuentes v. Empire Nissan, Inc., 19 Cal. 5th 93, 107 (2026).
[25] Id. at 108.
[26] Id. at 122.
[27] Id. at 110.
[28] Id.
[29] Id.
[30] Id. at 112 n.5.
[31] Id. at 111-112.
[32] Id. at 114.