Arbitration Agreements: What is the Difference Between Substantive and Procedural Unconscionability?

This year, in Basith v. Lithia Motors, Inc. (“Basith”) and Fuentes v. Empire Nissan, Inc. (“Fuentes”), the Second Appellate District of the California Court of Appeal (the “Court”) set forth the difference between procedural and substantive unconscionability as the basis for invalidating arbitration agreements. Procedural unconscionability focuses on the fairness of the process leading to the formation of the agreements, while substantive unconscionability focuses on whether the terms of the agreements are so one-sided that it unfairly benefits one of the parties to the agreement. The cases affirm the long-standing rule in California that both procedural and substantive unconscionability must