Legibility Is Procedural (Not Substantive) Unconscionability—But Illegible Adhesive Arbitration Clauses Trigger Close Scrutiny of Terms

I. Introduction

Fuentes v. Empire Nissan, Inc. addresses a recurring feature of employment arbitration contracting: arbitration clauses embedded in dense, tiny, difficult-to-read text presented on a take-it-or-leave-it basis. The dispute arose after Evangelina Yanez Fuentes, an Empire Nissan job applicant, signed an “Applicant Statement and Agreement” containing a broad arbitration mandate and a clause requiring any modification to be “in writing and signed by the President of the Company.” Later, she signed two confidentiality agreements that “supersede[] any and all prior agreements” on certain subjects and that contemplate injunctive relief, “remedies available … at law or in equity,” and attorney fees in a “legal action.”

After Empire Nissan terminated Fuentes following extended medical leave for cancer treatment, Fuentes sued for wrongful discharge and related claims. Empire Nissan moved to compel arbitration. The core questions became:

• Unconscionability: How should courts treat an arbitration agreement’s near-illegibility when evaluating procedural and substantive unconscionability?
• Double-counting concern: Does “tiny and unreadable print” support substantive unconscionability (as Davis v. TWC Dealer Group, Inc. held) or only procedural unconscionability (as the Court of Appeal held)?
• Mutuality: Do later confidentiality agreements create a one-sided carveout allowing the employer to litigate its likely claims in court while the employee must arbitrate?
• Contract formation: Does extreme illegibility plus pressured presentation negate mutual assent (validity), separate from unconscionability?

The Supreme Court granted review to resolve the conflict between Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662 and Fuentes v. Empire Nissan, Inc. (2023) 90 Cal.App.5th 919 on whether illegibility can be “double counted” as substantive unconscionability.

II. Summary of the Opinion

The Court clarifies California unconscionability doctrine in a targeted way:

• Key holding: A contract’s format/legibility generally is irrelevant to substantive unconscionability, which focuses on the fairness of the terms, not their typography. Illegibility supports procedural unconscionability (surprise/oppression) but cannot, standing alone, make terms “overly harsh” or “one-sided.”
• Important corollary: When a contract is difficult to read and presented oppressively, courts must closely scrutinize the contract’s terms for unfairness/one-sidedness, because high procedural unconscionability lowers the amount of substantive unconscionability required under the “sliding scale.”
• Interpretation error below: The Court of Appeal erred by applying a pro-arbitration interpretive presumption to resolve ambiguity about whether the confidentiality agreements carved out employer claims from arbitration; under Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, the policy “favoring” arbitration means equal treatment of arbitration agreements, not a thumb on the scale in favor of arbitration.
• Disposition error below: The Court of Appeal also erred by directing the trial court to grant the motion to compel arbitration even though the trial court had not reached Fuentes’s separate argument that the arbitration agreement did not give rise to a valid contract (mutual assent/formation concerns).

The Court reverses the Court of Appeal and remands for further proceedings, including potential record development and additional briefing, consistent with the clarified framework. The Court does not decide the ultimate enforceability of the arbitration agreement.

III. Analysis

A. Precedents Cited (and How They Shape the Decision)

1. The two-part unconscionability framework and the sliding scale

• OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111: Supplies much of the Court’s analytic vocabulary and factual sensitivity to “visually impenetrable” arbitration text.
  • The Court uses Kho to reinforce that illegibility/“tiny font” is classic procedural unconscionability because it contributes to surprise and undermines voluntary, informed agreement.
  • Critically, the Court clarifies that Kho’s reference to “fine-print terms” in a list of substantively suspect provisions was not a typography rule; it meant hidden, substantively harmful terms (i.e., concealment plus unfair content).
• Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478: Provides the Court’s current statement of the sliding-scale test and adhesion-contract scrutiny. The Court relies on Ramirez for de novo review on undisputed facts and for the rule that high procedural unconscionability can make “a relatively low degree” of substantive unconscionability sufficient.
• Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223: Supplies the canonical definitions: procedural unconscionability focuses on negotiation/formation circumstances (oppression/surprise), substantive unconscionability on “overly harsh” or “one-sided” terms.
• Sanchez v. Valencia Holding Co., LLC (2015) 61 Cal.4th 899: Anchors the “ultimate issue” framing—whether terms are sufficiently unfair, in view of all circumstances, to justify withholding enforcement.

2. Substantive unconscionability as “unreasonably favorable” terms

• Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109: Quoted (via Kho) for the central idea that substantive unconscionability targets terms “unreasonably favorable to the more powerful party.” It is also the bridge to the Williston treatise quote that led to confusion about “fine-print terms.”
• Stirlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, Perdue v. Crocker National Bank (1985) 38 Cal.3d 913, Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064: Cited (through Kho) as alternative formulations—“overly harsh,” “unduly oppressive,” “unfairly one-sided”—all converging on the same inquiry.
• Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233: Reinforces the rule construing ambiguities against the drafter (especially salient in employer-drafted arbitration clauses). The majority uses Sandquist to criticize how the Court of Appeal effectively resolved ambiguity in Empire Nissan’s favor.
• Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807: Supports applying contra proferentem “with peculiar force” in adhesion contexts, and is invoked to rebut any notion that arbitration gets interpretive favoritism.

3. Mutuality and one-sided carveouts in employment arbitration

• Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83: Provides the key mutuality principle: employers cannot require employees to arbitrate their likely claims while reserving to themselves a judicial forum for their likely claims, absent reasonable “business realities” justification. The trial court found a carveout; the Court of Appeal dissolved it by reading the confidentiality agreements as also arbitrable. The Supreme Court holds the Court of Appeal used the wrong interpretive lens (pro-arbitration presumption) and remands for proper scrutiny.
• Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1: Supplies the baseline contract-interpretation method: ascertain mutual intent primarily from the text, giving words their ordinary meaning. The majority uses Waller to frame the confidentiality-agreement interpretation problem and emphasizes the agreements’ references to “legal action” and court-centered language as indicating (at least) an ambiguity.
• Ford Motor Warranty Cases (2025) 17 Cal.5th 1122: Cited for the proposition that arbitration is strictly a matter of consent; absent agreement to arbitrate, the default is court litigation—used to support the majority’s reading that silence about arbitration can indicate non-arbitration (especially when contrasted with an arbitration agreement’s express “arbitration” language).
• Alberto v. Cambrian Homecare (2023) 91 Cal.App.5th 482: Cited for construing arbitration and confidentiality agreements together under Civil Code section 1642 when executed as part of the same transaction—supporting the majority’s identification of potential inter-document ambiguity.

4. “Fine-print terms,” concealment, and the limits of Davis

• Davis v. TWC Dealer Group, Inc. (2019) 41 Cal.App.5th 662: The case that treated tiny, hard-to-read print as supporting both procedural and substantive unconscionability, based on its reading of Kho. The Supreme Court rejects Davis on this point: illegibility is not itself substantively harsh or one-sided; it is instead a formation problem (procedural).
• Fisher v. MoneyGram Intern., Inc. (2021) 66 Cal.App.5th 1084 and Murrey v. Superior Court (2023) 87 Cal.App.5th 1223: Used to illustrate that “fine-print terms” is about hiding unfavorable terms (back of document; click-box signatures of lengthy materials), not mere small type divorced from substantive unfairness.

5. The arbitration “policy” after Quach

• Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562: The pivotal corrective to the Court of Appeal’s reasoning. The majority reiterates that the policy favoring arbitration is not “arbitration over litigation,” but “not disfavored”—arbitration agreements must be treated like other contracts. Thus, it is error to use a pro-arbitration presumption to decide interpretive ambiguity about whether a separate agreement preserves court access for the employer.

6. Validity/assent and illegible arbitration clauses

• Domestic Linen Supply Co., Inc. v. L J T Flowers, Inc. (2020) 58 Cal.App.5th 180 and Windsor Mills, Inc. v. Collins & Aikman Corp. (1972) 25 Cal.App.3d 987: Cited for the distinct formation principle that, in some circumstances, arbitration terms hidden in tiny or inconspicuous print—especially where the signer is not advised—may mean there was no agreement to arbitrate (lack of assent), not merely an unconscionable one.
• Celli v. Sports Car Club of America, Inc. (1972) 29 Cal.App.3d 511: Mentioned by the trial court as reflecting public-policy concerns with enforcing small, illegible contract provisions—relevant to the trial court’s decision not to reach validity/assent because it had already found unconscionability.

7. PAGA waiver background (not decided)

• Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348: Cited for the rule that compelled waiver of representative PAGA claims is contrary to public policy and unenforceable. The Supreme Court notes the argument but leaves the remedial framework to the trial court on remand, referencing the Court’s recent clarification in Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478.

8. Dissent-cited authorities (framing the internal dispute)

• Advanced Micro Devices, Inc. v. Intel Corp. (1994) 9 Cal.4th 362 and O'Hare v. Municipal Resource Consultants (2003) 107 Cal.App.4th 267: Used by the dissent to argue that references to remedies “at law or in equity” and injunctions do not imply a court forum because arbitrators can award legal and equitable relief, including injunctions.
• Lombardo v. Gramercy Court (2024) 107 Cal.App.5th 1028: Cited by the dissent to support that “legal action” can be used in connection with arbitration arrangements.
• Carmona v. Lincoln Millennium Car Wash, Inc. (2014) 226 Cal.App.4th 74: Used by the dissent as an example of explicit “court or arbitrator” language that would more clearly show a carveout—contrasting with the confidentiality agreements’ lack of explicit forum designation.

B. Legal Reasoning

1. The Court’s central doctrinal clarification: illegibility is procedural, not substantive

The Court draws a bright conceptual line: procedural unconscionability concerns how the agreement was formed (oppression and surprise), while substantive unconscionability concerns what the agreement requires (harshness/one-sidedness). Typography and legibility affect the former because they can hide terms and impede understanding, but they do not change the content of a term.

This resolves the Davis conflict: the Supreme Court rejects treating small font as substantive unfairness per se, clarifying that “fine-print terms” is shorthand for hidden, unfavorable terms (concealment + substantive harm), not small font alone.

2. Heightened scrutiny as the functional consequence of illegibility

Although the Court rejects “double counting,” it does not minimize the practical significance of illegibility. Instead, it channels illegibility into the sliding-scale framework: where formation is highly oppressive/surprising—here, five minutes to review, no meaningful chance to ask questions, no copy, pressure to hurry, and near-illegible “mammoth” text—courts must closely scrutinize substantive terms. Illegibility thus affects outcomes indirectly: it increases procedural unconscionability and reduces the quantum of substantive unfairness needed.

3. Correcting interpretive method: no pro-arbitration thumb on the scale

The Court holds the Court of Appeal erred by invoking “the principle that the law strongly favors arbitration” to decide whether the confidentiality agreements preserved arbitration (thereby eliminating a carveout). Under Quach v. California Commerce Club, Inc. (2024) 16 Cal.5th 562, the “favoring” policy is an anti-discrimination principle—arbitration agreements are not to be disfavored, but also not to receive special interpretive advantages over other contracts.

In an adhesion setting with high procedural unconscionability, the Court emphasizes:

• Ambiguities are construed against the drafter (Sandquist v. Lebo Automotive, Inc. (2016) 1 Cal.5th 233).
• Substantive terms must be closely scrutinized for one-sidedness (OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111).
• The analysis must not be short-circuited by assuming arbitration is preferred as a forum.

4. Why remand—what the Court did (and did not) decide

The Court does not definitively decide whether the confidentiality agreements create an employer-only carveout. It identifies ambiguity when the agreements are read together, critiques the Court of Appeal’s reliance on a pro-arbitration presumption, and flags an insufficient factual foundation for an assumption that “the president never signed any modification.” It therefore remands to allow:

• Further development of the record on signature/modification issues (in the trial court’s discretion).
• Proper interpretive analysis without a pro-arbitration presumption.
• Consideration of additional issues the trial court previously did not reach, including contract validity/assent and (potentially) the PAGA-waiver remedial framework under Ramirez v. Charter Communications, Inc. (2024) 16 Cal.5th 478.

The dissent sharply disagrees, arguing (1) the signature issue was neither raised nor disputed, (2) the confidentiality terms do not imply a court forum because arbitrators can award legal/equitable relief, and (3) any ambiguity should be resolved in favor of validity (and thus arbitration). The majority, by contrast, treats “equal treatment” and adhesion scrutiny as incompatible with pro-arbitration interpretive presumptions and emphasizes the necessity of allowing the trial court to address unruled-upon validity arguments.

C. Impact

1. Doctrinal impact: a clear anti-“double counting” rule

The most concrete precedent is narrow but consequential: illegibility/formatting is a procedural unconscionability factor and generally cannot itself establish substantive unconscionability. This will predictably curb arguments (and some lower-court holdings) that treat small font as a standalone substantive defect.

2. Practical impact: illegibility still matters—via the sliding scale and scrutiny

The Court simultaneously strengthens the plaintiff-side pathway: by reaffirming that severe surprise/oppression requires close scrutiny of terms, the decision encourages litigants and courts to focus on whether illegible arbitration clauses also contain (for example) one-sided carveouts, remedy limitations, fee-shifting traps, shortened limitations periods, or asymmetric access to court. The “win” for employers on the narrow “no substantive illegibility” rule may be offset by intensified term-by-term judicial review in cases of extreme presentation abuse.

3. Contract interpretation impact: no arbitration forum preference in ambiguity resolution

The decision reinforces Quach: ambiguity cannot be resolved simply by saying the law “favors arbitration.” Especially in adhesive employment contracting, courts must apply ordinary interpretive principles (including contra proferentem) rather than special deference to arbitration. This matters most in multi-document employment relationships, where arbitration clauses interact with confidentiality, noncompete-related, trade secret, or policy documents.

4. Litigation-management impact: renewed attention to formation/assent theories

By faulting the Court of Appeal for directing arbitration without allowing the trial court to consider the unaddressed validity/assent argument, the Court signals that formation defenses remain analytically distinct from unconscionability. Parties can expect increased attention to whether arbitration terms were sufficiently presented to create agreement at all (citing Domestic Linen Supply Co., Inc. v. L J T Flowers, Inc. (2020) 58 Cal.App.5th 180 and Windsor Mills, Inc. v. Collins & Aikman Corp. (1972) 25 Cal.App.3d 987).

5. Legislative signal

In a notable footnote, the Court suggests the Legislature “may wish to consider specifying requirements for employment contracts that promote legibility and comprehensibility,” analogizing to statutory readability requirements in other settings (e.g., Code Civ. Proc., § 1295; Bus. & Prof. Code, § 7159, subd. (c); Ins. Code, § 12820, subd. (b)(4); Civ. Code, § 1630). While not law, this is an institutional cue that the problem is systemic and may be better solved by ex ante formatting rules rather than ex post unconscionability litigation.

IV. Complex Concepts Simplified

• Procedural unconscionability: Problems in the process—pressure, lack of choice, hidden terms, rushed signing, unreadable text (oppression/surprise).
• Substantive unconscionability: Problems in the content—terms that are overly harsh or one-sided (e.g., employer can sue in court for its claims while employee must arbitrate hers).
• Sliding scale: The more procedurally unfair the formation, the less substantive unfairness is needed (and vice versa). Illegibility increases procedural unfairness, which triggers closer scrutiny of the term content.
• “Fine-print terms” (as clarified here): Not “small font” by itself, but unfair terms hidden in a way that makes them easy to miss.
• Adhesion contract: Standardized, take-it-or-leave-it agreement drafted by the stronger party (common in employment). Adhesion does not automatically invalidate a contract but heightens judicial vigilance.
• Contra proferentem: Ambiguities are construed against the drafter (here, the employer), especially in adhesion settings.
• Policy “favoring arbitration” (post-Quach): Means arbitration agreements cannot be treated worse than other contracts—not that courts should prefer arbitration over litigation when interpreting ambiguous documents.
• Mutual assent / contract validity (formation): A separate question from unconscionability—whether the parties formed a contract at all. Extremely inconspicuous/hidden arbitration provisions can, in some cases, negate agreement to arbitrate.
• PAGA waiver: A clause attempting to bar representative enforcement actions under the Labor Code Private Attorneys General Act; under Iskanian v. CLS Transportation Los Angeles, LLC (2014) 59 Cal.4th 348, a compelled waiver is contrary to public policy (with remedial questions informed by later cases like Ramirez).

V. Conclusion

Fuentes v. Empire Nissan, Inc. establishes a focused but influential rule: illegibility and tiny font are procedural unconscionability factors, not substantive unconscionability defects. Yet the Court simultaneously strengthens judicial oversight by requiring that, where oppressive and surprising formation is shown—especially in adhesive employment arbitration—courts must closely scrutinize the actual terms for one-sidedness and unfairness and must not use a pro-arbitration presumption to resolve contractual ambiguity.

The decision’s practical message to drafters is straightforward: while typography alone will not condemn terms as substantively unconscionable, illegible presentation can elevate procedural unconscionability enough to make even modest substantive imbalances fatal—and it can invite formation-based challenges to assent. The remand underscores that enforceability disputes in this space will increasingly turn on careful, contract-by-contract examination of both document design and substantive symmetry.