Sliding Scales of Justice? An Analysis of California’s Approach to Unconscionability

The unconscionability doctrine empowers courts to make a moral judgment about whether to enforce a contract. This judgment has two dimensions: first, courts consider the fairness of the contract formation process (“procedural unconscionability”); and second, they consider the fairness of the contract’s terms (“substantive unconscionability”). Most courts apply the unconscionability doctrine only if a contract evinces both procedural and substantive unconscionability. Of these courts, some require a fixed degree of both kinds of unconscionability, while others—a growing majority—assess unconscionability on a sliding scale, allowing a significant degree of one kind of unconscionability to compensate for a lesser degree of the other.

Despite its growing prominence, the sliding-scale approach to unconscionability remains undertheorized. Courts have seldom discussed its rationale, and scholarly commentators have largely neglected the concept. To help fill this lacuna, this Note provides a history and analysis of California’s sliding-scale approach to unconscionability.

The history of California’s unconscionability doctrine reveals that the doctrine has traditionally revolved around substantive unconscionability. California courts have generally avoided finding unconscionability in the absence of significant substantive unconscionability. Nonetheless, recent case law suggests that this trend is changing. This Note argues that this change is welcome; a genuine, bidirectional sliding-scale approach, which allows procedural unfairness to play a larger role in the unconscionability analysis, is justified and desirable. This Note also argues that the sliding-scale approach should sometimes allow courts to find contracts unconscionable due to significant procedural or substantive unconscionability alone.

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Introduction

The unconscionability doctrine empowers courts to make a judgement about whether a contract is so unfair that it does not merit enforcement. The doctrine is regularly used to challenge, inter alia, price terms, interest rates, penalty clauses, arbitration agreements, forum-selection clauses, limitations on remedies, and provisions that allow parties to unilaterally terminate a contract.[1] While the modern form of the unconscionability doctrine grew out of the Uniform Commercial Code[2] and concerns about consumer protection,[3] the unconscionability doctrine is now applied in a variety of other contexts.[4] The need to police the fairness of employment arbitration agreements, for example, has driven much of the doctrine’s recent development in California.[5]

The modern approach to unconscionability divides the moral judgment that courts make into two parts. First, courts consider the fairness of the process through which the challenged contract was formed. This is the question of “procedural unconscionability,” which usually involves courts inquiring into whether the contract formation process evinced unequal bargaining power, coercive tactics, deceptive language, or hidden terms.[6] Second, courts consider the fairness of the terms of the agreement itself—whether its terms are “overly harsh” or “unduly oppressive” or “so one-sided as to shock the conscience.”[7] This is the question of “substantive unconscionability.”

Most courts apply the unconscionability doctrine only if a contract evinces both procedural and substantive unconscionability.[8] Of these courts, some require a fixed degree of both kinds of unconscionability, finding a contract unenforceable only if it meets independent thresholds for both procedural and substantive abuse.[9] A growing majority of courts, however, assess unconscionability on a “sliding scale,” allowing a significant showing of one kind of unconscionability to make up for a weaker showing of the other.[10]

Despite its growing prominence, the sliding-scale approach to unconscionability remains surprisingly undertheorized. Courts have not tended to discuss its rationale,[11] and although the unconscionability doctrine remains a magnet for scholarly commentary, few articles address the sliding-scale approach to the doctrine.[12] To help fill this lacuna, this Note provides a history and analysis of the sliding-scale approach in California.

California is, in many ways, the ideal case study for the sliding-scale approach to unconscionability. California decides many more unconscionability cases than other states,[13] and California courts invoke the sliding-scale concept far more often than courts in other jurisdictions.[14] Moreover, California’s landmark case, Armendariz v. Foundation Health Psychcare Services, Inc.,[15] is arguably the most influential case with respect to the development of the sliding-scale approach in other states.[16] In all of these respects, a study of California’s sliding-scale approach promises to shed light on this approach more generally.

California has also recently turned a new page when it comes to the unconscionability doctrine and the sliding scale. In OTO, L.L.C. v. Kho, the California Supreme Court found an employment arbitration agreement unconscionable largely on the basis of its significant procedural unconscionability, taking for granted that the terms of the agreement might have been acceptable in other circumstances.[17] Kho represents the first time a California court has applied the sliding scale in this way, centering procedural unconscionability and moving away from the unconscionability doctrine’s historical focus on substantive unconscionability.[18] Kho thus raises important questions about whether and how the sliding-scale approach ought to be limited. Critics, for example, have argued that Kho distorts the very concept of unconscionability, conflicting with the idea that the doctrine applies only to contracts with terms that “shock the conscience.”[19] However, why should the unconscionability doctrine revolve around substantive unconscionability in this way? Why even require a showing of both procedural and substantive unconscionability?[20]

Addressing such questions requires thinking about the history and principles behind the sliding-scale concept. It also requires sustained analysis. These are the tasks of this Note. Part I sets out the history of the sliding-scale approach in California. The sliding scale’s history reveals that it has tended to be oriented around substantive unconscionability. This orientation reflects the larger history of the unconscionability doctrine itself. Courts have tended to see procedural unconscionability as a limit on the doctrine, rather than as an animating reason for the doctrine in the first place.[21] In this respect, Kho, with its emphasis on procedural unconscionability, represents a novel and important application of the sliding scale, arguably one that better fits the sliding-scale concept, since it genuinely allows the scale to slide in two directions.

After this discussion of the history of the sliding-scale approach, Parts II and III turn toward analysis. Part II considers the justification for the sliding scale as it is currently employed in California. It argues that a bidirectional sliding scale, such as that applied in Kho, vindicates the values embedded in the unconscionability doctrine, accords with the text and purpose of the statute codifying unconscionability in California, and allows the doctrine to flexibly address problems posed by form contracts and by contexts like employment, where there is a long-term and inherently unequal relationship. In these respects, Kho represents a desirable decision. California courts should embrace it.

Part III then turns to the question of whether the sliding-scale approach should be employed even more expansively. That is, if a contract evidences significant enough procedural or substantive unconscionability, why still require some modicum of the other kind? If the scale can slide, why not allow it to slide to the point where one kind of unconscionability is sufficient for a court’s refusing to enforce a contract? Part III argues that California courts should not always require both kinds of unconscionability. Permitting findings of pure procedural or substantive unconscionability is more consistent with the logic of the sliding-scale concept, better accords with the values at stake in unconscionability, is arguably consistent with California’s statutory law, and is well supported by policy considerations, particularly as the unconscionability doctrine has come to play a bigger role in contexts outside of consumer protection.

I. The History of the Sliding-Scale Approach to Unconscionability in California

Before turning to analysis, it is crucial to get a sense of the history of the sliding-scale approach. This Section investigates the roots of the procedural-substantive distinction and the sliding-scale approach in the Uniform Commercial Code (UCC), examines the legislative history of the statute that codifies the unconscionability doctrine in California, and traces how the sliding-scale approach emerged in California and developed through its case law. This Section finds that the unconscionability doctrine and sliding-scale approach are tied to the contract law values of fair exchange, social welfare, autonomy, and contractual liberty; that California enacted its unconscionability doctrine to serve as a broad safety net, especially for vulnerable parties; that the sliding-scale approach became more prominent in response to the growth of employment arbitration agreements; and that Kho represents a genuine change in direction from California courts’ tendency to center the concept of unconscionability around substantive problems with contracts, rather than the procedural problems with them.

A.     Unconscionability and Uniform Commercial Code Section 2-302

California’s sliding-scale approach must be understood in relation to the larger history of the unconscionability doctrine, particularly the emergence of the doctrine’s modern form in the Uniform Commercial Code. This larger history sheds light on the roots of the sliding-scale concept, the values underpinning the unconscionability doctrine today, and the context for California’s own codification and development of the unconscionability doctrine.

The modern form of the unconscionability doctrine emerged with the development of Section 2-302 of the UCC in the mid-twentieth century.[22] Prior to Section 2-302, unconscionability largely operated in the shadows.[23] Courts could not openly refuse to enforce agreements that they deemed unfair, and so they often resorted to “covert tools.”[24] These tools included bending other contract law rules, such as rules about interpretation or consideration, in order to arrive at what they viewed as a fair outcome.[25] In codifying the unconscionability doctrine, Section 2-302 was meant to provide courts with a tool to explicitly police unfair contracts.[26]

While UCC Section 2-302 empowered courts to police contracts for unconscionability, it did not provide much guidance on what this policing should look like.[27] Indeed, Section 2-302’s definition of unconscionability was circular: “The basic test is whether, in light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.”[28] Consequently, courts and commentators set about fashioning a clearer analytical framework with which to apply Section 2-302.[29] This process of clarification led to the distinction between procedural and substantive unconscionability.[30] It also led to the sliding-scale concept, which was rooted in John A. Spanogle’s analysis of the approach to unconscionability taken by courts of equity at the turn of the twentieth century.[31] Spanogle observed that courts of equity tended to give less weight to procedural issues as the terms of an allegedly unconscionable contract became harsher.[32] He generalized this concept, suggesting that “unconscionability may be found in a severely harsh term although the procedural abuse was mild, and vice versa.”[33]

The procedural-substantive framework and sliding-scale approach were tied up with the values underpinning the modern unconscionability doctrine. The substantive unconscionability analysis was meant to advance the values of fair exchange and social welfare, allowing courts to refuse to enforce contracts with unjust or overly harsh terms.[34] The procedural unconscionability analysis, on the other hand, served the values of autonomy and contractual liberty: values that were undermined by oppressive or deceptive contract formations.[35] The sliding-scale approach was meant to enhance the unconscionability doctrine’s ability to serve both sets of these values. It empowered courts to prioritize fair exchange and social welfare by refusing to enforce contracts with particularly one-sided or oppressive contract terms, even if such contracts lacked significant procedural unconscionability,[36] and it allowed courts to scrutinize contracts more closely as assent became more dubious.[37]

B.     California’s Codification of Unconscionability in Civil Code Section 1670.5

During the 1960s, most states adopted commercial codes that included a version of UCC Section 2-302.[38] California, however, was one of the few holdouts.[39] The California legislature considered codifying unconscionability—indeed, it commissioned three reports on the issue—but ultimately decided against it.[40] This decision was rooted in worries about the uncertainty that codification might create, along with fears about the potential for judicial overreaching.[41] In particular, the legislature raised concerns about the possibility of courts refusing to enforce contracts that had been “thoroughly negotiated.”[42] Ultimately, for the California legislature at the time, these concerns outweighed the potential benefits of codifying the doctrine.

While consumer advocates lobbied for bills codifying unconscionability throughout the early 1970s,[43] the legislature did not enact such a bill until 1979, when it passed Assembly Bill (AB) 510. AB 510 aimed to curb a deceptive scheme that involved door-to-door salesmen pressuring or deceiving vulnerable homeowners into purchasing overpriced goods with credit that was secured with a lien against their home.[44] The contracts often contained hidden fees, and when homeowners were unable to make payments, the contract would be assigned to another company, which would exercise its lien rights, foreclose with little notice, and buy the house at a significant discount at a nonjudicial auction.[45] AB 510 addressed this scheme directly, prohibiting financial institutions from entering into contracts that provided for reassignment (an important mechanism for the scheme) and bulking up the procedural protections surrounding foreclosures.[46] Additionally, and most importantly for our purposes, AB 510 also codified the unconscionability doctrine as Section 1670.5 of California’s Civil Code.[47] Notably, the legislature adopted the exact language of UCC Section 2-302, changing the words only to indicate that Section 1670.5 applied to all contracts, not just commercial contracts.[48] Shortly after enacting Section 1670.5, the legislature also adopted UCC Section 2-302’s official comments as an aid to interpreting it.[49]

The history of Section 1670.5 reveals some important insights. First, the statute clearly envisioned an unconscionability doctrine that aligned with UCC Section 2-302. Second, the law was adopted with vulnerable parties in mind. A report that the Department of Consumer Affairs wrote for the governor, for instance, emphasized that the victims of the deceptive scheme that AB 510 addressed were “elderly” and “poor.”[50] Similarly, the author of the bill, Assemblyman Jack Fenton, described the bill as aimed in part at protecting the “uninformed.”[51]

Finally, the legislative history of Section 1670.5 suggests that it was enacted to serve as a broad safety net.[52] Section 1670.5 was enacted as part of a bill that was otherwise primarily aimed at addressing a particular exploitive scheme. Indeed, AB 510 enacted a number of very specific measures that addressed the foreclosure scheme that motivated it, directly regulating the assignment of contracts and procedures around foreclosure.[53] Against this backdrop, it is clear that Section 1670.5, with its broad, flexible language, was meant to serve a general protective purpose, to cover future, unforeseen contractual abuses.[54] It is not surprising, then, that the author of AB 510 described the aim of Section 1670.5 in broad terms: “to make all unconscionable contracts voidable and also [to provide] that unconscionable provisions in a consumer contract are unlawful.”[55]

C.    Graham v. Scissor-Tail, Inc., and A & M Produce v. FMC Corp.

Shortly after Section 1670.5 was enacted, two important California cases were decided, each of which provided a different framework for analyzing a contract’s unconscionability.

Graham v. Scissor-Tail, Inc. synthesized prior California case law, which had largely applied unconscionability in the context of adhesion contracts.[56] Graham involved a contract between Bill Graham, a prominent band promoter, and Leon Russell, a famous musician.[57] The contract between Graham and Russell was a form contract mandated by Russell’s union, the American Federation of Musicians, and it included an arbitration agreement that required disputes to be arbitrated by a union representative.[58] The California Supreme Court found this agreement unconscionable.[59] The court explained that the first step in analyzing the case was to consider whether the contract was one of adhesion.[60] If the contract was adhesive, it could be voided if it violated the reasonable expectations of the imposed-upon party or was “unduly oppressive or ‘unconscionable.’”[61] Applying this framework to the case, the court found that the contract was adhesive because Graham had no choice but to contract with union musicians.[62] The court also found the arbitration agreement to be unconscionable because the mandated union arbitrators were too closely associated with Russell.[63]

The year after Graham came down, a California Court of Appeal decided A & M Produce v. FMC Corp.[64] A & M Produce concerned a contract between a commercial farmer and a major agricultural machine seller, which included terms that disclaimed warranties and limited consequential damages.[65] Whereas Graham synthesized prior California cases to fashion a rule for unconscionability around adhesion, A & M Produce drew heavily on the scholarly commentary on UCC Section 2-302 and on cases from outside of California that had been decided under the UCC.[66]

A & M Produce thus explained that unconscionability had two aspects—procedural and substantive—and that a contract was unconscionable only if it evidenced both procedural and substantive shortcomings.[67] The A & M Produce court unpacked procedural unconscionability in terms of “oppression” and “surprise,” with oppression having to do with inequality of bargaining power and surprise having to do with deceptive practices and hidden terms.[68] Substantive unconscionability, on the other hand, had to do with “overly harsh” or “one-sided” terms, or terms that created “unreasonable risk reallocations.”[69] A & M Produce thus introduced many of the key aspects of the modern approach that California courts take to unconscionability.[70]

A & M Produce also introduced the sliding-scale concept into California law. There are three notable aspects to this part of the decision. First, the court articulated the sliding-scale idea only in terms of significant procedural unconscionability compensating for minimal substantive unconscionability, and not vice versa: “enforceability of the clause is tied to the procedural aspects of unconscionability . . . such that the greater the unfair surprise or inequality of bargaining power, the less unreasonable the risk allocation which will be tolerated.”[71] Second, the court offered no significant commentary on what justified this approach.[72] And finally, the court introduced the sliding-scale concept in dicta and did not apply the sliding scale in order to resolve the case.[73]

A & M Produce and Graham thus proffered different frameworks for analyzing unconscionability. These frameworks coexisted throughout the 1980s and 1990s, but as explained in the next section, by the 2000s the A & M Produce framework and sliding-scale concept came to predominate.[74]

D.    The Development of the Sliding-Scale Approach after A & M Produce

1.     The Early Cases

After A & M Produce, California courts slowly began to develop the sliding-scale concept. However, they did so in a way that departed from the principle articulated by the A & M court. Whereas A & M Produce’s sliding scale emphasized that significant procedural unconscionability could serve as justification for lowering the required threshold for substantive unconscionability, California courts ultimately embraced a sliding scale that permitted severe substantive unconscionability to compensate for low procedural unconscionability.

The most influential early case dealing with the sliding-scale concept was 1991’s Carboni v. Arrospide, which concerned a 200 percent interest rate on a $99,000 loan imposed on a desperate consumer who was unable to secure a loan from another lender.[75] Carboni was the first California case to apply the sliding-scale approach to render a decision.[76] Unlike A & M Produce, however, Carboni emphasized the contract’s substantive unconscionability. The Carboni court explained that there was a “sliding scale relationship” between procedural and substantive unconscionability, such that “the greater the degree of substantive unconscionability, the less the degree of procedural unconscionability that is required to annul the contract or clause.”[77] The court then applied this approach, finding the contract unconscionable because “even if the procedural aspect of unconscionability in this case was slight, the substantive unconscionability was severe.”[78] In particular, the court emphasized that the interest rate was ten times the standard rate.[79]

Carboni thus departed from A & M Produce. It also proved more influential, at least with respect to the sliding-scale concept. Indeed, A & M Produce’s procedural-to-substantive sliding scale was not applied by other courts, and after Carboni only one California court even used A & M Produce’s “sliding scale” language in its articulation of the rules around unconscionability.[80] By contrast, several courts adopted and applied Carboni’s approach.[81] California courts thus embraced a sliding scale that centered substantive unconscionability, treating procedural unconscionability as a constraint that could be loosened in the face of significantly harsh terms.

2.     Armendariz and the Contemporary Predominance of the Sliding Scale

The next major case to articulate the sliding-scale approach was the 2000 case, Armendariz v. Foundation Health Psychcare Services, Inc.,[82] a landmark in California’s unconscionability jurisprudence. In Armendariz, the California Supreme Court applied the procedural-substantive framework to a one-sided employment arbitration agreement, which required employee claims, but not employer claims, to be arbitrated.[83] Notably, Armendariz explicitly articulated a bidirectional sliding scale.[84] Indeed, since Armendariz, courts in California have regularly invoked the principle that “the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”[85]

Armendariz led to a fundamental change in California’s unconscionability jurisprudence for two reasons. First, Armendariz was the first case in which the California Supreme Court applied the A & M Produce framework.[86] Previously, when considering unconscionability, the court applied Graham, while acknowledging that A & M Produce provided an alternative framework for analyzing unconscionability.[87] Second, and perhaps more importantly, Armendariz applied the A & M Produce framework to an arbitration agreement. Before Armendariz, most courts applied Graham when analyzing the unconscionability of arbitration agreements.[88] One court, for example, explained that “the rules of ‘procedural and substantive unconscionability’ . . . have nothing to do with the enforcement of an agreement to arbitrate.”[89] After Armendariz, however, the sliding-scale approach became the dominant way that courts analyzed arbitration agreements.[90] Armendariz therefore led to the decline of the Graham approach, which almost entirely disappeared by 2003.[91] It also led to the predominance of the procedural-substantive framework and sliding-scale approach to unconscionability.

Armendariz thus had a significant impact on California’s unconscionability doctrine, coming at a time when the doctrine was growing in importance as more businesses and employers utilized arbitration agreements to contain legal risk.[92] Further, the Armendariz court provided a clear and authoritative articulation of the bidirectional sliding-scale approach, even while it did not apply that concept to the case before it or discuss the rationale for this approach.[93]

Still, although Armendariz led courts to regularly invoke the notion that significant quantities of one kind of unconscionability could compensate for weaker showings of the other, courts nonetheless continued to center their analysis around substantive unconscionability.[94] In doing so, courts treated the procedural prong more like a constraint on the doctrine than as a driver of the unconscionability analysis in its own right.[95] California courts may have adopted the bidirectional language of Armendariz, but they continued to apply the sliding scale in the spirit of Carboni.

3.     OTO, LLC v. Kho and the Sliding Scale’s Procedural Turn

It is against the tendency to prioritize the substantive side of the sliding scale that OTO, L.L.C. v. Kho stands in contrast. In Kho, the California Supreme Court, for the first time, invalidated a contract for unconscionability based primarily on its procedural infirmities. The contract in dispute was an arbitration agreement, which required an employee to commit to arbitrating wage claims rather than using a protective, government-initiated process to bring them.[96] While the arbitration procedures may have represented an “acceptable substitute” for the government-initiated process, the court held that an employee “may not be coerced or misled into accepting this trade.”[97] The Kho majority thus found that significant problems with the contract formation process—including the adhesive nature of the agreement, the vulnerability of the worker to his employer, the way the employer burdened the worker in how it presented the agreement, and the contract’s complex language and prolix text[98]—justified refusing to enforce the agreement, even in the face of a “relatively low degree of substantive unconscionability.”[99] In this way, Kho mirrored how courts commonly reason about adhesion in the context of significant substantive unconscionability. While adhesion is ordinarily an acceptable feature of contracts, courts regularly refuse to enforce adhesion contracts if they contain terms that are significantly harsh or one-sided.[100] The Kho sliding scale provided the inverse idea: terms that might be otherwise acceptable may nevertheless justify a finding of unconscionability in the context of a contract arrived at through a particularly oppressive or deceptive process.

Kho therefore firmly established that California’s sliding scale is bidirectional. And notably, in its reasoning, the court in Kho emphasized the values protected by the procedural aspect of the unconscionability doctrine. For example, the court explained that, even if the terms Kho accepted might have been permissible in other circumstances, he “should at least have a reasonable opportunity to understand the bargain he is making.”[101] The court in Kho thus took seriously the values encoded in the procedural prong of the unconscionability doctrine—autonomy and contractual liberty.[102] It treated these values, along with the procedural inquiry, not as a mere constraint on the unconscionability doctrine, but as something to be affirmatively promoted, a driver of the doctrine in their own right.

II. Justifying California’s Sliding-Scale Approach

The sliding-scale approach has thus become the predominant way for California courts to police contracts for unconscionability, and its application has gradually expanded over time in relation to the rise in arbitration agreements. What justifies the sliding-scale approach? This question has become even more pressing after Kho. Indeed, in a lengthy dissent, Justice Chin argued that the Kho majority fundamentally distorted the principles underlying the unconscionability doctrine.[103] Is this right? How should we think about the relationship between the sliding-scale approach and the law, values, and policies surrounding the unconscionability doctrine?

Courts and commentators have not had much to say on these issues.[104] This Section thus aims to provide a sustained analysis of California’s bidirectional sliding-scale approach, arguing that this approach vindicates the values at stake in the unconscionability doctrine, is consistent with California law, and represents a desirable policy. The analysis is divided into two Sections. Part II.A considers the justification for allowing a significant degree of substantive unconscionability to compensate for a lesser degree of procedural unconscionability (the substantive-to-procedural direction of the sliding scale). Part II.B then considers the justification for allowing significant procedural unconscionability to make up for lesser substantive unconscionability (the procedural-to-substantive direction of the sliding scale).

A.     The Substantive-to-Procedural Direction of the Sliding Scale

The idea that a substantial degree of substantive unconscionability justifies a court to invalidate a contract, despite that contract’s formation process reflecting relatively little procedural abuse, is strongly rooted in the values underpinning the unconscionability doctrine, in California law, and in policy considerations.

1.     The substantive-to-procedural sliding scale advances contract law values.

As mentioned above, there are two sets of values embedded in the unconscionability doctrine.[105] The substantive-to-procedural sliding scale aligns with both sets.

First, the substantive-to-procedural sliding scale advances the values of fair exchange and social welfare because it makes it easier for courts to refuse to enforce particularly unfair contract terms. Consider, for example, Carboni.[106] There, the court refused to enforce a 200 percent interest rate on a $99,000 loan primarily because the interest rate was more than ten times the standard rate applied to such loans.[107] Such an interest rate is clearly predatory; it is almost certain to result in default for the average consumer. Thus, by employing the sliding scale, the court was able to refuse to enforce the contract, despite the fact that there was only limited procedural unconscionability (the contract was offered on a take-it-or-leave-it basis to a consumer who could not get a loan elsewhere).[108] In another jurisdiction with a less flexible approach to the procedural prong of the unconscionability analysis, the court would not have been able to refuse to enforce such an unfair, predatory term.[109]

Widening the unconscionability doctrine’s safety net like the Carboni court did—adopting the substantive-to-procedural sliding scale—both directly and indirectly serves the values of fair exchange and social welfare. It directly serves these values by making it easier for courts to refuse to enforce severely unfair contract terms and to protect parties who stand to be harmed by such terms.[110] Further, it indirectly advances fair exchange and social welfare by putting parties on notice that courts will not enforce exploitive form contracts. Such notice disincentivizes particularly oppressive or one-sided contracts, especially in contexts like consumer and employment contracts, where one party drives the terms.

The substantive-to-procedural sliding scale also advances, or is at least consistent with, the procedural values of autonomy and contractual liberty. Many commentators are wary of permitting courts to refuse to enforce contracts based purely on substantive unconscionability. These commentators worry about paternalism and courts invalidating contracts to which parties freely agreed.[111] The substantive-to-procedural sliding scale, however, does not necessarily face these problems. As it is employed in California, for example, there must still be a modicum of procedural unconscionability for a court to refuse to enforce a contract.[112] There must, in other words, be some reason for doubting the validity of the contract formation process, such as adhesion.

Thus, permitting a significant amount of substantive unconscionability to compensate for a lesser degree of procedural unconscionability does not undermine the values of autonomy and freedom of contract. In fact, the substantive-to-procedural sliding scale arguably advances those values.[113] Indeed, why, one might ask, would a party agree to particularly abusive terms? The answer is likely to be connected to issues that affect the validity of the contract formation process: the party did not know or had no choice. In this way, very harsh terms typically reflect impaired assent.[114] The substantive-to-procedural sliding scale thus arguably promotes autonomy and freedom of contract in two ways. First, it allows courts to police a greater number of contracts that likely fail to express parties’ autonomy and contractual liberty; and second, it incentivizes powerful parties to adopt contractual terms to which systemically disadvantaged parties, like consumers or employees, would be more likely to assent.

2.     The substantive-to-procedural sliding scale is consistent with the text and purpose of Section 1670.5 and with California common law.

In addition to aligning with the values at stake in the unconscionability doctrine, the substantive-to-procedural sliding scale also accords with California statutory and common law.

Consider, first, the text of California Civil Code Section 1670.5. Section 1670.5 explicitly adopted the open language of UCC Section 2-302, which provides a broad, flexible standard for unconscionability. Indeed, the official comments to Section 1670.5 explain that the “basic test is whether, in light of the general background and needs of the particular case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.”[115] This language is clearly consistent with the substantive-to-procedural sliding scale; it does not even imply the need for procedural unconscionability in the face of significant one-sidedness.

Moreover, the cases cited in the official comments to Section 1670.5 support the idea that significant degrees of substantive unconscionability should be able to compensate for relatively low degrees of procedural unfairness. For example, those comments cite Campbell Soup Co. v. Wentz when explaining that the unconscionability doctrine’s purpose is to prevent “oppression and unfair surprise.”[116] That case, though, is primarily about substantive abuse; the only significant procedural issue the Wentz court raised was that the contract was drafted and provided by Campbell Soup with its interests in mind.[117] In this respect, Wentz is comparable to Carboni. The same can be said for the other cases cited in the official comments to Section 1670.5. All these cases are primarily about abusive terms in the context of form contracts, with nothing to suggest the need for courts to find significant procedural unconscionability in order to find a contract unenforceable.[118]

The text of Section 1670.5 thus supports the substantive-to-procedural sliding scale. Likewise, the section’s legislative history also supports this direction of the sliding scale. As discussed above, Section 1670.5 was enacted as a part of AB 510, a bill that was aimed at addressing a scheme that took advantage of vulnerable consumers.[119] AB 510 contained a number of specific provisions that directly addressed the particular scheme it was drafted to stop.[120] In this context, the breadth of Section 1670.5, along with the decision to adopt it as a part of California’s civil code instead of California’s commercial code, is striking. Section 1670.5 was clearly enacted to provide a flexible judicial safety net, which would empower courts to proactively protect individuals from contractual abuse.[121] To this end, the sliding-scale concept fits well with the evident purpose of Section 1670.5 because it allows the unconscionability doctrine to be applied in an agile, adaptable way and enhances the doctrine’s safety valve function.

Finally, it is worth adding that the substantive-to-procedural sliding scale aligns with California’s common law precedent. Although the Graham test has fallen out of favor, it remains recognized as an alternative framework for analyzing unconscionability.[122] Recall that Graham synthesized California common law to provide a test that instructed courts to consider (1) whether a contract was one of adhesion and (2) whether the contract’s terms either violated the reasonable expectations of the imposed-upon party or were unconscionable.[123] Adhesion, though, is not in itself particularly procedurally abusive; it simply provides a context in which one party can easily be abused.[124] It would thus be inconsistent with Graham and the common law that it synthesized for the procedural-substantive analytical framework always to require the presence of a significant degree of procedural abuse for a finding of unconscionability.

3.     The substantive-to-procedural sliding scale represents a desirable policy.

The substantive-to-procedural sliding scale is thus well-grounded as a matter of principle. It also represents a desirable—perhaps even necessary—policy.

The primary policy reason for adopting the substantive-to-procedural sliding scale is to address the problems posed by the prominence of form contracts in our society. Form agreements, which are typically unilaterally imposed upon vulnerable consumers and workers, dominate the modern world of contracts.[125] Research suggests, though, that most people simply are not in a position to read or understand the agreements with which they are presented.[126] Moreover, the market is not up to the task of regulating the businesses and employers who impose such form contracts.[127] In these respects, it is particularly important to empower courts to police the substance of contracts, even if those contracts are simply form contracts that reflect relatively little procedural abuse in their own right. This need to police form contracts led Melissa Lonegrass, in one of the only scholarly inquiries into the sliding-scale approach, to suggest that the “primary strength of the sliding-scale approach is its relaxation of the procedural unconscionability prong.”[128]

More generally, the substantive-to-procedural sliding scale is good policy because it complements the primary virtue of the unconscionability doctrine: the doctrine’s flexibility.[129] As discussed above, allowing courts to invalidate contracts based largely upon their significant substantive unconscionability promotes contract law’s values of fair exchange and social welfare, empowering courts to balance these values against contract law’s other values in order to arrive at a just result.

B.     The Procedural-to-Substantive Direction of the Sliding Scale

In certain respects, the substantive-to-procedural direction of the sliding scale is noncontroversial. As the history attests, California courts were quick to embrace the idea that significant substantive unconscionability could compensate for relatively weak showings of procedural unconscionability.[130]

By contrast, the procedural-to-substantive direction of the sliding scale has not been embraced in the same way. Kho, with its application of the procedural-to-substantive sliding scale, was criticized for being out of step with the nature of the unconscionability doctrine[131] and as representing a thinly veiled instance of California’s hostility toward federally authorized arbitration agreements.[132] These criticisms, though, miss their mark. While the application of the procedural-to-substantive sliding scale certainly moves the unconscionability doctrine in a new direction, this move is justified, even laudable. The procedural-to-substantive sliding scale, like its substantive-to-procedural counterpart, advances the unconscionability doctrine’s values, is consistent with California law, and represents a desirable policy, particularly given the growing importance of the unconscionability doctrine within the employment context. California courts should embrace Kho.

1.     The procedural-to-substantive sliding scale advances contract law values.

The procedural-to-substantive sliding scale is a principled way to apply the unconscionability doctrine. It fits squarely within the spirit of the doctrine, advancing the values of fair exchange and social welfare, on the one hand, and autonomy and contractual liberty, on the other.

Most obviously, the procedural-to-substantive sliding scale advances the values of autonomy and contractual liberty by allowing courts to refuse to enforce contracts that are the result of a particularly unfair formation process, even if the contract’s terms are not in themselves particularly unconscionable. In Kho, for example, the court stressed that while the terms of the arbitration agreement might have been acceptable in other circumstances, given the procedural deficiencies in the contract formation process, Kho “should at least have a reasonable opportunity to understand the bargain he is making.”[133] In this respect, the contract’s procedural deficiencies—the adhesive nature of the contract; the dependence of Kho on his job for financial security; the fact that Kho was expected to sign the contract immediately and not to ask questions; the fact that any time spent reading the contract would have impacted Kho’s pay; and the way in which terms were obscured by dense legal language and tiny text—collectively undermined Kho’s ability to autonomously engage in the contract formation process.[134] Key to the Kho decision and the procedural-to-substantive sliding scale is thus the idea that genuine assent matters, particularly when a contract’s terms require serious concessions, like waiving public rights.

The procedural-to-substantive sliding scale therefore directly protects autonomy and contractual liberty. It also indirectly serves those values. By making it easier for courts to refuse to enforce contracts that evidence severe procedural abuses, the procedural-to-substantive sliding scale gives reason to employers and businesses to structure their contracting processes in ways that are less unfair to workers and consumers. For instance, after Kho was decided, a business-side employment law firm suggested a number of reforms that employers could make to avoid the risk of their arbitration agreements being found invalid, such as providing translations for employees whose first language is not English, using legible font, and providing employees more time to review the agreement.[135]

However, the procedural-to-substantive sliding scale does not only advance autonomy and contractual liberty. It also promises to advance the substantive values that have traditionally been central to the unconscionability doctrine. First, by deterring procedural unconscionability, the procedural-to-substantive sliding scale promotes fairer contract terms. While employees and consumers generally do not have much negotiating power, employers and businesses might be wary about including offensive terms if their workers or customers are more likely to be able to review them. Second, and more directly, the procedural-to-substantive sliding scale brings a larger number of unfair or seriously one-sided contractual terms within the unconscionability doctrine’s ambit. In this respect, minimally, the procedural-to-substantive sliding scale advances fair exchange and social welfare by allowing courts to closely scrutinize the fairness of the terms of certain contracts that would otherwise be outside the realm of the unconscionability doctrine.[136]

2.     The procedural-to-substantive sliding scale is consistent with the text and purpose of Section 1670.5 and with California common law.

Giving courts the ability to find a contract unenforceable based largely upon significant procedural unconscionability, as discussed above, thus serves contract law’s values. It is also consistent with California’s statutory and common law.

Of course, the text of Section 1670.5 (and UCC Section 2-302) is silent about the concept of a sliding scale, and there is no doubt that the statute reflects an emphasis on substantive unconscionability. As discussed above, for example, the cases cited in the official comments to Section 1670.5 largely concern contracts with significantly unfair terms, with little emphasis on procedural issues.[137] This emphasis on substantive unconscionability is also reflected in some of Section 1670.5’s language. For instance, the official comments proffer a test that instructs courts to look to whether a contract’s “clauses . . . are so one-sided as to be unconscionable.”[138] This makes the central focus of the inquiry appear to be substantive unconscionability.

Still, other language in Section 1670.5 supports the procedural-to-substantive sliding. While the “basic test” articulated in that section’s comments refers to the contract’s clauses being so one-sided as to be unconscionable, elsewhere the comments explain that the statute is meant to empower courts to “police explicitly against the contracts or clauses which they find unconscionable.”[139] Insofar as a “contract” connotes more than the mere terms of an agreement, insofar as it implicates ideas of offer, acceptance, and mutual assent, this articulation of the purpose of the statute suggests that it is permissible for courts to consider issues impacting contract formation. Moreover, the statute is explicit that the basic principle of the unconscionability doctrine is the prevention of “oppression and unfair surprise.”[140] Both oppression and unfair surprise, though, suggest that procedural abuses and sharp practices matter to unconscionability. While “oppression” could refer to oppressive terms, commentators have long observed that the notion of oppression is ambiguous; it can also refer to practices that unfairly take advantage of or cultivate power imbalances.[141] Furthermore, unfair surprise has an inherently procedural flavor. Indeed, as one court observed, it is conceivable that a contract might unfairly surprise a party without its terms even being unconscionable.[142] That “oppression” and unfair “surprise” admit of a procedural interpretation is also reflected in the fact that California courts unpack the concept of procedural unconscionability using these precise terms: taking “oppression” to involve abuses relating to inequality of bargaining power and “surprise” to have to do with deceptive practices and hidden terms.[143]

The principles proffered in Section 1670.5’s official comments are thus consistent with a procedural-to-substantive sliding scale. So too is the basic test those comments put forward. Although that test centers around the notion that a contract’s “clauses . . . are so one-sided as to be unconscionable,” the comments are explicit that this must be assessed “in light of the general background and the needs of the particular case.”[144] Surely, the contract formation process can serve as a relevant part of the general background and therefore influence whether the terms of a contract are so one-sided as to be unconscionable. Consider, for example, Kho. There the majority found that, given the particularly unfair contract formation process, the term requiring Kho to give up a protective, government-initiated process for resolving wage disputes was simply too one-sided to enforce, even if the term would have been acceptable in the context of a less-problematic contract formation process.[145] In this respect, Kho and the procedural-to-substantive sliding scale fit comfortably within the basic test articulated by Section 1670.5’s official comments. Against the background of a particularly problematic contract formation process, one-sided terms that might otherwise be acceptable can become “so one-sided as to be unconscionable.”[146]

The language of Section 1670.5 thus supports a procedural-to-substantive sliding scale. Moreover, such a sliding scale is arguably supported by the legislative history of Section 1670.5. Indeed, as argued above, Section 1670.5 was passed to serve as a flexible judicial safety net.[147] Allowing for findings of unconscionability based upon significant procedural abuse, even if the terms of the agreement are only minimally unconscionable, serves to enhance the unconscionability doctrine’s flexibility. Moreover, given that Section 1670.5 was passed in part to protect “uninformed consumers”[148] who had been deceived and pressured by unscrupulous salespeople,[149] there is reason to think that procedural abuse should play a dynamic role in the Section 1670.5 unconscionability analysis.

Still, Justice Chin, in his dissenting opinion in Kho, argued that the procedural-to-substantive sliding scale is inconsistent with California precedent.[150] In particular, he argued that it was inconsistent with the rules surrounding substantive unconscionability to allow for findings of unconscionability based on terms that could be acceptable in other contexts.[151] For instance, Justice Chin pointed to the longstanding principle that a court “may not invalidate ‘one-sided contract provisions’ upon a mere showing that ‘the deal, in retrospect, was unfair or a bad bargain.’”[152] Likewise, Justice Chin pointed to the general way that California courts have defined substantive unconscionability as requiring that the contract’s terms be “unduly oppressive,” “unreasonably favorable,” or “so one-sided as to ‘shock the conscience’” or that the party alleging unconscionability establish “a substantial degree of unfairness beyond an ‘old-fashioned bad bargain.’”[153] All of these principles, Justice Chin argued, were at odds with the idea that a term that may be acceptable in some circumstances could satisfy the substantive unconscionability prong.

The procedural-to-substantive sliding scale, though, can be squared with such precedent. Rather than viewing the standards surrounding substantive unconscionability as independent from considerations of procedural unconscionability, the two ideas should be understood together. Indeed, recall the test from Section 1670.5’s official comments: whether an agreement’s terms are “so one-sided as to be unconscionable” must be understood in terms of the larger context surrounding the agreement. Likewise, here, whether terms are “unduly oppressive” or “unreasonably favorable” or “so one-sided as to shock the conscience” should depend, in part, on the procedure through which those terms were arrived at. The question, in other words, is whether the terms are unduly oppressive, in light of the contract’s procedural unconscionability. Similarly, finding a significant degree of procedural unconscionability might turn an agreement with terms that would otherwise be acceptable into something “beyond an old-fashioned bad bargain.” And finding such a contract unconscionable would not be based upon a “mere showing” that the deal was unfair or a bad bargain; it would also be based upon a showing that the unfair deal was arrived at through a procedurally dubious process, thus calling into question its validity.

3.     The procedural-to-substantive sliding scale represents a desirable policy.

Not only is the procedural-to-substantive sliding scale consistent with California statutory and case law; it is also good policy. As argued above, the procedural-to-substantive sliding scale advances the values at stake in contract law and the unconscionability doctrine. Moreover, extant critiques of the procedural-to-substantive sliding scale are misplaced or overstated. Far from being unduly expansive or creating special problems of vagueness and uncertainty, the procedural-to-substantive sliding scale simply allows the unconscionability doctrine to operate more flexibly, presenting courts with a way to address the unique challenges posed by contracts formed in a greater number of contexts.

As discussed earlier, the procedural-to-substantive sliding scale serves the central values of contract law: it promotes fair exchange, social welfare, autonomy, and freedom of contract. In this respect, there is no principled reason to bar the sliding scale from being applied in contexts like Kho, where a particularly unfair contract formation process led to a contract with terms that were substantively dubious, even if acceptable in other circumstances. Still, even if the procedural-to-substantive sliding scale is justified in principle, one might worry about the practical limits or consequences of this way of applying the sliding-scale concept.

For example, in his Kho dissent, Justice Chin raised concerns about the procedural-to-substantive sliding scale being vague or creating uncertainty.[154] The procedural-to-substantive sliding scale empowers courts to refuse to enforce contracts if they find a relatively low degree of substantive unconscionability against the background of a significant degree of procedural unconscionability. But what, Justice Chin asked, constitutes a “relatively low” degree of substantive unconscionability? Low relative to what? How low is enough?

This worry that the procedural-to-substantive sliding scale is vague or creates uncertainty is misplaced. It seems simply to reflect a more general concern about the unconscionability doctrine itself. What, for instance, is the difference between asking courts to judge whether a contract evidences a high degree of substantive unconscionability, as California courts have done since the 1990s in when applying the substantive-to-procedural sliding scale, and asking those courts to judge whether a contract evidences a low degree of substantive unconscionability? Or, to push the point further, what is the difference between asking courts to make the judgment that a contract’s terms are “unduly oppressive” or “overly harsh” and asking them to make a judgment about how oppressive or harsh those terms are? The worry about vagueness or uncertainty is simply not unique to the procedural-to-substantive sliding scale; it amounts to a worry about the unconscionability doctrine itself.

Moreover, these worries about vagueness and uncertainty are overstated. First, the open-textured nature of the unconscionability standard is central to its ability to serve as a flexible judicial safety net.[155] To ask for precision in this context is to miss the point of the doctrine. Second, empirical studies have found that courts apply the unconscionability doctrine in a predictable way.[156] Indeed, the California Supreme Court itself has remarked upon the careful way that California courts have applied the doctrine,[157] a fact that is particularly notable since California courts have been judging the degrees of substantive unconscionability for more than thirty years. Finally, there is no special reason to worry about uncertainty or predictability with respect to courts making judgments about degrees of procedural unconscionability. In fact, procedural unconscionability is arguably the more straightforward prong of the unconscionability doctrine, with its clear analytical categories. Far from being problematically vague, then, the procedural-to-substantive sliding scale simply increases the flexibility with which courts can police unfair contracts, thus advancing the purpose of the unconscionability doctrine.

Still, even if the procedural-to-substantive application of the sliding scale does not create an unduly vague standard, one might worry that it creates an unduly expansive one.[158] California courts, for example, generally recognize that workers are particularly susceptible to abusive contracts because almost all workers are under economic pressure to accept any agreements with which they are presented.[159] This fact, combined with the adhesive nature of employment contracts, has led some courts to find a “significant element” of procedural unconscionability in the average employment contract.[160] Would the procedural-to-substantive sliding scale render it too easy to invalidate employment contracts? It does not seem so.

Kho suggests that there will be significant limits on a court’s ability to invalidate an employment contract based on its significant procedural unconscionability. Indeed, Kho also concerned an employment arbitration agreement, but, importantly, the court there relied on abuses that went far beyond the procedural dangers posed by the ordinary employment context. As discussed above, the Kho majority pointed to the fact that Kho was presented with the agreement during worktime and was expected to sign it immediately; that the contract was presented by a porter who could not answer questions about it; that any time Kho spent reading the contract would have reduced his pay; that the arbitration agreement was contained in a block of text with tiny font; that it contained complex legal terms; that understanding some of its terms would have required a familiarity with California case law; and that Kho was a layperson, whose first language was not English.[161] Kho thus suggests that an ordinary employment contract would not provide enough procedural unconscionability to invalidate terms that were minimally substantively unconscionable.[162]

Still, there is no doubt that the procedural-to-substantive sliding scale will likely lead courts to scrutinize employment contracts more rigorously. However, this is not a problem; it is a key virtue of this way of applying the sliding-scale concept.

Traditionally, the unconscionability doctrine has been the concern of mostly consumer protection advocates. This is reflected in the origins of Section 1670.5 and the early debates about the UCC’s unconscionability provision.[163] As employers began using arbitration agreements to limit legal liability, however, unconscionability became more important in the employment context. As discussed above, the growth of the sliding scale in California is directly connected to this trend.[164] The move towards prioritizing procedural unconscionability can be conceptualized as a response to the growing importance of policing how contracts are formed in the employment context. Indeed, the employer-employee relationship creates ample opportunity for abuses that impact the contract formation process. The relationship is ongoing, often personal, and is inherently unequal because employees are dependent upon their employers for wages and benefits. The procedural-to-substantive sliding scale is therefore desirable precisely because it enables courts to take seriously the potential for procedural abuse by employers.

In sum, while courts have tended to treat procedural unconscionability as a constraint on the unconscionability doctrine, rather than as central to the doctrine in its own right, this tendency should not determine the unconscionability doctrine’s future. Indeed, Kho’s procedural-to-substantive application of the sliding scale is well justified. It is consistent with the text and history of Section 1670.5 and California law, advances the values at stake in contract law and the unconscionability doctrine, enhances the doctrine’s ability to serve as a flexible safety net, and is responsive to the contemporary needs of the unconscionability doctrine.

III. California’s Sliding Scale Should Be Employed More Expansively

The previous Section argued that California’s current sliding-scale approach rests on solid ground. Allowing courts to refuse to enforce contracts on the basis of a significant degree of either procedural or substantive unconscionability, combined with a relatively low degree of the other kind of unconscionability, advances contract law’s values, is consistent with California common law and statutory law, and is desirable as a matter of policy. But why limit the application of the unconscionability doctrine to cases in which a contract evinces both procedural and substantive unconscionability? Why not sometimes permit a very significant degree of either procedural or substantive unconscionability to be sufficient for a court to refuse to enforce a contract?

This Section argues that, in fact, there is good reason for California courts to adopt this more expansive application of the sliding scale, which permits findings of pure procedural or pure substantive unconscionability. First, the logic of a sliding scale suggests that it could, in principle, sometimes make sense for a court to refuse to enforce a contract solely on the basis of its very severe procedural or substantive unconscionability. Second, while there are certainly reasonable concerns about adopting a sliding scale that permits either pure procedural or pure substantive unconscionability, these concerns should not outweigh the significant legal, normative, and practical considerations in favor of expanding the sliding scale to encompass pure procedural and substantive unconscionability.

A.     The Logic of the Sliding Scale

While at least one commentator has distinguished between the sliding-scale approach to unconscionability and a “single-prong” approach, which permits findings of unconscionability based upon substantive or procedural unfairness alone,[165] there is nothing in the sliding-scale concept that implies that a modicum of each type of unconscionability is required for a court to refuse to enforce a contract. In fact, the underlying logic of the sliding-scale concept suggests that it would make sense, in principle, for courts sometimes to refuse to enforce a contract simply on the grounds that it evidences particularly severe substantive or procedural unconscionability. Indeed, the driving idea behind the sliding scale is that a significant degree of one kind of unconscionability can make up for a lower degree of the other. Courts, in other words, are empowered to consider the overall unconscionability of a contract by balancing its procedural and substantive aspects.[166] If this is right, though, it seems to follow that as a contract becomes more procedurally or substantively unconscionable, a court has less reason to require the other kind. At a certain point, then, once a contract evidences severe enough procedural or substantive unconscionability, a court should, in principle, be justified in finding a contract unenforceable solely on that basis.

Of course, the point here is simply that it makes sense, in principle, to extend the sliding-scale approach and allow courts to refuse to enforce contracts on the basis of their procedural or substantive unconscionability alone. However, this does not settle matters. The next two Sections thus consider the normative, practical, and legal considerations that bear on whether California should expand the sliding scale in this way.

B.     Pure Substantive Unconscionability

California has good reason to adopt a sliding-scale approach that permits finding unconscionability based upon severely one-sided or unfair contract terms alone. First, permitting pure substantive unconscionability like this is supported by Section 1670.5 and its legislative history. Moreover, although there are considerations that speak against permitting findings of pure substantive unconscionability, these considerations are not as serious as they seem on their face, and the benefits of extending the sliding scale in this way outweigh them.

1.     Pure substantive unconscionability is supported by Section 1670.5 and its legislative history.

While California precedent is clear that courts are not permitted to find a contract unconscionable based upon the harshness of its terms alone,[167] the text and history of Section 1670.5 arguably supports permitting pure substantive unconscionability.

First, there is nothing in the language of Section 1670.5 to suggest that procedural unconscionability is required in order for a court to invalidate a contract as unconscionable.[168] The official comments instruct that the basic test “is whether, in the light of the general background and the needs of the particular case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.”[169] This, however, is consistent with terms being so one-sided that they are unconscionable, regardless of whether the contract formation process reflected any particular procedural abuses. Likewise, the comments explain that the principle underlying the unconscionability doctrine is “the prevention of oppression and unfair surprise . . . and not disturbance of allocation of risks because of superior bargaining power.”[170] Again, though, nothing here suggests that procedural unconscionability is required for a court to invalidate a contract; terms can be oppressive in the absence of procedural abuse.[171]

Moreover, the cases cited in Section 1670.5’s official comments suggest that procedural unconscionability should not always be required for a finding of unconscionability. As mentioned above, Campbell Soup Co. v. Wentz., which the comments cite for the proposition that unconscionability is meant to prevent oppression and unfair surprise, was decided primarily on the issue of substantive unconscionability.[172] In Wentz, a farmer breached an agreement with Campbell Soup Company, which required the farmer to sell carrots to Campbell Soup for $23 to $30 per ton in a market where carrots were worth $90 per ton.[173] The court refused to enforce the contract because of its harsh terms.[174] In particular, the court pointed to the exploitative price term, a severe liquidated damages term, a term which required the farmer to waive Campbell Soup’s liability under various circumstances in which it might not accept the farmer’s carrots, and a term which forced the farmer to refrain from selling his carrots to third parties if Campbell Soup refused them.[175] For the Wentz court, this was simply “too hard a bargain and too one-sided an agreement to entitle the plaintiff to relief in a court of conscience.”[176]

Wentz thus supports the idea that some contracts are so one-sided that they should not be enforced, even in the absence of serious procedural deficiencies. Indeed, the Wentz court explicitly found its justification for refusing to enforce the agreement “in the contract itself.”[177] The only procedural issue the court even mentioned was that the form contract had “quite obviously been drawn by skilful [sic] draftsmen with the buyer’s interests in mind,” which hardly amounts to procedural unconscionability.[178] Likewise, the other decisions that Section 1670.5’s official comments cite similarly center on issues with the substance of the contracts, not their formation process.[179] The inclusion of Wentz and these other cases in the official comments to Section 1670.5 suggests that Section 1670.5 was meant to permit courts to police against very significant substantive unconscionability, even in the absence of procedural unconscionability.

Finally, it is worth noting that reading Section 1670.5 to permit findings of pure substantive unconscionability is consistent with the legislative purpose behind the law. Allowing courts to invalidate significantly unfair agreements, absent evidence of particular procedural abuses, would promote the unconscionability doctrine’s breadth and flexibility.[180] Moreover, although Section 1670.5 was enacted in response to a scheme that took advantage of vulnerable individuals, and although that scheme sometimes involved procedural abuses,[181] it is not obvious that the law was meant to apply only in the context of such abuse. Indeed, as argued above, Section 1670.5’s breadth is striking when compared to the particularity of the other provisions of the bill that enacted it; Section 1670.5 was clearly intended to provide protections that went beyond the circumstances of the particular predatory scheme that motivated it.[182] Moreover, the law’s author, Jack Fenton, explained that Section 1670.5 was meant to prevent “all unconscionable contracts.”[183] This language suggests that Section 1670.5 should be read expansively.[184] Finally, even if one focuses on Fenton’s remark that Section 1670.5 would protect the “uninformed consumer who enters into a patently unreasonable contract,” being uninformed does not necessarily mean that one has been deceived or pressured. It could simply mean one is out of one’s depth.

2.     Expanding the sliding scale to permit findings of pure substantive unconscionability is justified as a normative and policy matter.

Even if the idea of pure substantive unconscionability is consistent with Section 1670.5 (and, for the same reasons, UCC Section 2-302), numerous courts and commentators have argued against permitting findings of unconscionability in the absence of procedural issues. There are two main clusters of concern. First, critics worry about the risks of judicial overreach, uncertainty, and inefficiency;[185] and second, they worry about undermining the values of autonomy and contractual liberty by permitting courts to impose their own value judgments on parties.[186] These concerns, however, are overstated. Moreover, critics of pure substantive unconscionability undervalue its potential to promote fair exchange and judicial integrity.

Many critics of the idea of pure substantive unconscionability worry that courts will inevitably overreach in their application of the unconscionability doctrine if they are not required to find defects in the contract formation process. These critics thus worry that permitting pure substantive unconscionability will lead to uncertainty and market instability.[187] But the evidence cuts against such worries.

As discussed above, there is simply no significant reason to distrust courts in their application of the unconscionability doctrine.[188] Empirical studies suggest that courts have generally been predictable and consistent in how they have applied the doctrine.[189] Moreover, courts tend to apply the unconscionability doctrine cautiously.[190] For example, in a recent case concerning the unconscionability of a consumer loan’s interest rate, the California Supreme Court responded to a worry about the unconscionability doctrine “supplanting market conditions” by pointing to the “cautious tread” of California courts and by explaining that the worry “lacks in empirical support.”[191] Likewise, courts in jurisdictions that permit findings of pure substantive unconscionability have been found to apply the doctrine narrowly.[192] There is simply no good reason to think that, once permitted to find unconscionability in the absence of procedural deficiencies, California courts will suddenly become unpredictable or careless in their application of the unconscionability doctrine.

Still, even if courts do not overreach, the notion of pure substantive unconscionability arguably runs afoul of the values of autonomy and freedom of contract, which are central to modern contract law. Some worry that, regardless of the particular terms of an agreement, it is paternalistic for a court to interpose itself between parties who have freely agreed to those terms.[193] Absent procedural unconscionability, the argument goes, there is no justification for a court to impose its judgment on parties like this.[194]

There are three main responses to this worry. First, even if there is no direct evidence of procedural abuse, egregiously unfair terms can be taken as indirect evidence of procedural deficiencies.[195] This idea is reflected in a famous, early articulation of the unconscionability standard: a bargain that “no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other.”[196] If this is right, if substantive unconscionability is indicative of problems with the contract formation process, then findings of pure substantive unconscionability, particularly when limited to cases of egregiously unfair terms, are not necessarily paternalistic or contrary to contractual liberty.[197]

Second, pure substantive unconscionability might be justified, even if it is in tension with the values of autonomy and contractual liberty, because of the way it promotes other contract law values. The unconscionability doctrine, after all, is also about promoting social welfare and fair exchange, and it is not obvious that procedural considerations should always constrain the capacity of the unconscionability doctrine to promote these substantive values.[198] If a contract’s terms are particularly egregious—if they, for instance, impose an interest rate that is clearly impossible for a consumer to pay off, guaranteeing that the consumer will lose their home[199]—then perhaps the injustice of enforcing such a term should outweigh worries about a court imposing its own value judgments on the parties. At the very least, it seems reasonable to permit courts to countenance this possibility.

There is thus a real question about how we ought to balance the values of social welfare and fair exchange in relation to those of autonomy and freedom of contract. It is not clear that we should always prioritize the latter, as some critics of pure substantive unconscionability suggest. And this is especially true in light of the fact, discussed above, that courts have tended to apply the unconscionability doctrine predictably and cautiously.

Finally, two additional policy considerations support allowing findings of pure substantive unconscionability, even in the face of worries about protecting parties’ autonomy. First, in addition to promoting social welfare and fair exchange with respect to the immediate contract a court is considering, allowing findings of pure substantive unconscionability could act as a general deterrent, leading contracts to reflect fairer terms more broadly. In this respect, pure substantive unconscionability does not necessarily reflect paternalism toward individual parties; it may simply reflect a policy judgment about the need to structure behavior more broadly.

Second, permitting courts to refuse to enforce terms that are severely unfair or one-sided promotes judicial integrity. To paraphrase the court in Campbell Soup Co. v. Wentz, a party who has secured particularly unfair terms should not be entitled to the court’s help in enforcing those terms.[200] Courts should be empowered to refuse to sanction a contract with untoward terms; they should not be required to “permit themselves to be used as instruments of inequity and injustice.”[201] In this respect, allowing findings of pure substantive unconscionability would preserve the judiciary’s integrity and enhance its perceived legitimacy.

While critics have raised important concerns about the notion of pure substantive unconscionability, then, these concerns should not carry the day. The evidence does not substantiate the common argument that permitting findings of pure substantive unconscionability would lead to judicial overreach, uncertainty, or market instability. Moreover, even if pure substantive unconscionability is not always consistent with the values of autonomy and freedom of contract, it is not clear that those values should always take precedent over the values of social welfare and fair exchange. Finally, permitting findings of pure substantive unconscionability would promote important policy goals, serving as a general deterrent and preserving the integrity of the courts.

C.     Pure Procedural Unconscionability

There has not been much sustained inquiry into the idea of extending the unconscionability doctrine to permit findings of unconscionability based upon severe procedural deficiencies alone.[202] This likely reflects the tendency of courts and commentators to conceptualize the unconscionability doctrine as primarily being about policing the terms of a contract, rather than how that contract was formed in the first place. Nevertheless, there are strong reasons to expand the sliding scale so that it permits courts to refuse to enforce contracts based solely upon their severe procedural unconscionability. While pure procedural unconscionability is arguably not rooted in Section 1670.5 as strongly as pure substantive unconscionability, the language and purpose of the statute still support it. Moreover, this Section argues that permitting findings of pure procedural unconscionability would be desirable as a matter of policy.

1.     Section 1670.5 supports expanding the sliding scale to permit findings of pure procedural unconscionability.

The language and legislative history of Section 1670.5 is open enough to justify expanding the sliding scale to permit findings of unconscionability based upon a contract’s severe procedural deficiencies alone.

There are at least three aspects of Section 1670.5’s language that support interpreting it to permit findings of pure procedural unconscionability. First, as discussed above, Section 1670.5’s official comments explain that the section was meant to empower courts to police “the contracts or clauses which they find to be unconscionable.”[203] Insofar as the term “contracts” can be taken to mean something beyond the terms of an agreement, to include mutual assent, then Section 1670.5 can be read to imply the independent importance of procedural considerations.[204]

Second, Section 1670.5’s official comments articulate two principles for determining whether a contract is unconscionable: oppression and unfair surprise.[205] As discussed above, though, both of these principles have a procedural face.[206] Indeed, California courts analyze procedural unconscionability in precisely these terms, looking for evidence of either “oppression” or “surprise.”[207] It thus seems plausible to construe Section 1670.5 as permitting courts to invalidate contracts on the basis of their procedural deficiencies alone. In other words, procedural abuses—one party taking advantage of their power over another or one party employing tactics to make it harder for the other party to know what they are agreeing to—could be severe enough to create the oppression and unfair surprise that, per the principles of Section 1670.5, justify a court in refusing to enforce a contract.

And finally, although the “basic test” articulated in Section 1670.5’s official comments ostensibly centers around the terms of a contract, the language of that test permits courts to evaluate those terms in light of the contract formation process.[208] The test, recall, is “whether, in light of the background and general needs of the particular case, the clauses involved are so one-sided as to be unconscionable.”[209] As discussed above, one should construe this test as building in the sliding-scale concept.[210] That is, whether a contract’s terms are “so one-sided as to be unconscionable” depends upon both the background and general needs of the case, considerations that should include questions about how the contract was formed. The contract formation process, in other words, provides crucial context for determining when terms become one-sided enough to be unconscionable. In this respect, the test arguably supports some cases of pure procedural unconscionability. Against the background of certain particularly egregious procedural abuses, that is to say, terms that primarily benefit the abusive party might be one-sided enough to be justifiably treated as unconscionable, even if those terms are not unconscionable in themselves.

Imagine, for example, that a car dealership imposed a standard arbitration agreement on its employee, requiring the employee to individually arbitrate any claims, waiving their right to pursue any kind of class or collective action. Imagine further that the dealership imposed this agreement upon the employee in a severely oppressive and deceptive way: the employee was required to sign the agreement in order to keep their job; they were given only five minutes to sign it, with no opportunity to ask questions; and the agreement itself was written in legalese, in a tiny font, contained within a large block of text, and was photocopied so many times as to be literally unreadable.[211]

Given facts like these, a court applying the basic test articulated in the official comments of Section 1670.5 could reasonably find the contract unconscionable, despite the fact that the terms of the arbitration agreement are not unconscionable in their own right. First, while the terms of the above arbitration agreement are not unconscionable, they are nevertheless one-sided. Waiver of class action and class relief only benefits the employer, who is unlikely to need to pursue a class action against their workers, and it only harms the worker, who would benefit from retaining the ability to pursue class actions. And second, given the background and needs of the case, the agreement here is arguably so one-sided as to be unconscionable. That is, by imposing on the worker a one-sided agreement that was literally unreadable, by denying them any opportunity to ask questions about the agreement or to review it, and by forcing them to sign the agreement quickly or risk losing their job, the car dealership evidenced severe oppression and unfair surprise. Such procedural abuse would arguably justify a court to find the contract too one-sided to enforce. Waiving one’s right to pursue class action and class relief is a serious concession; people in the worker’s shoes should be put on notice that they are giving up their rights—they should not be coerced and deceived into it.[212]

Arguably, then, the “basic test” articulated in the official comments of Section 1670.5 permits findings of pure procedural unconscionability in certain contexts. And such pure procedural unconscionability is consistent with Section 1670.5’s explicit principle of preventing oppression and unfair surprise and with its emphasis on allowing courts to police both contracts and their clauses. There is thus a significant textual case to be made for pure procedural unconscionability.

Moreover, reading Section 1670.5 to allow for findings of pure procedural unconscionability also fits with that statute’s legislative history and broader purpose. Section 1670.5 was enacted, in part, to serve as a flexible judicial safety net, which would allow courts to refuse to enforce all unconscionable contracts.[213] Of course, Section 1670.5 was enacted as part of a bill that was no doubt concerned with the substance of the contracts being used to defraud vulnerable consumers out of their homes.[214] Still, the authors of Section 1670.5 adopted broad, open language, and they clearly envisioned a law that would apply to all kinds of contracts, one that went beyond the immediate scheme that motivated AB 510.[215] To effectuate the broad purpose of Section 1670.5, it thus makes sense to construe the statute broadly, permitting findings of pure procedural unconscionability. First, construing Section 1670.5 broadly in this way allows the statute to serve its protective purpose in a wider variety of contexts, including contexts, like employment, where procedural abuses pose a particular danger to contract integrity. Moreover, as a historical matter, the distinction between substantive and procedural unconscionability was well-developed by 1979, when Section 1670.5 was enacted.[216] In this respect, if Section 1670.5 was truly meant to make all unconscionable contracts voidable, as its author suggested,[217] there is reason to read that statute as applying to both procedural and substantive unconscionability.

2.     Expanding the sliding scale to permit findings of pure procedural unconscionability is a desirable policy.

The statutory case for pure procedural unconscionability is admittedly not definitive. Still, policy considerations strongly support expanding the sliding scale to permit findings of unconscionability based upon severe procedural unconscionability alone. Expanding the sliding scale to include pure procedural unconscionability would enhance the unconscionability doctrine’s flexibility, promote contract law values, and support judicial integrity. Moreover, the scattered criticisms directed at the idea of pure procedural unconscionability miss their mark.

Expanding the sliding scale to permit pure procedural unconscionability would serve the unconscionability doctrine’s flexibility, one of its key virtues.[218] Doctrines such as duress and fraudulent misrepresentation, for example, which ensure that contracts reflect genuine assent, are typically applied in a formal way, such that many contracts that reflect procedural abuse might fall between their cracks.[219] A court, for instance, would likely not find duress or fraudulent misrepresentation in the employment arbitration case mentioned in Part III.C.1. Pure procedural unconscionability can thus serve as a safety net, catching contracts that were formed through an abusive process but that do not neatly fall under contract law’s other autonomy-protecting doctrines.[220]

In addition to promoting the unconscionability doctrine’s flexibility, allowing courts to refuse to enforce contracts on the basis of severe procedural unconscionability alone would advance the values of contract law. Indeed, as just discussed, permitting pure procedural unconscionability would fill the gaps between contract law’s other autonomy-protecting doctrines. In this respect, permitting pure procedural unconscionability would directly promote autonomy and contractual liberty, enabling courts to refuse to enforce contracts that were formed through a process that manifested severe abuse of power or unfair surprise. Likewise, as with the procedural-to-substantive sliding scale in general, allowing for pure procedural unconscionability would also indirectly advance autonomy and contractual liberty, because it would deter businesses and employers from procedural abuses.[221] Finally, pure procedural unconscionability would promote fair exchange and social welfare by incentivizing parties to contract with one another through fairer, more transparent processes—processes that would more likely lead to acceptable bargains.[222]

Like with pure substantive unconscionability, allowing courts to refuse to enforce contracts formed through egregiously deficient processes would also serve the end of judicial integrity. Requiring the formality of both substantive and procedural unconscionability requires courts to enforce contracts that evidence a great deal of only one kind of unconscionability.[223] This permits courts to be used as “instruments of inequity and injustice.”[224] There is therefore reason to give courts more flexibility when it comes to unconscionability, so that they do not have to put their authority behind contracts that run afoul of societal norms surrounding justice, including fair processes of exchange.

Thus, expanding the sliding scale to encompass pure procedural unconscionability would position the unconscionability doctrine both to function more flexibly and to protect autonomy and contractual liberty more effectively. In this way, the expansion would empower courts to use their discretion to take a stand in the face of an important range of injustices. Finally, extant criticisms of pure procedural unconscionability are overstated.

For example, some worry that permitting findings of pure procedural unconscionability would be an economic disaster because it would call into question the validity of all form contracts, which are crucial to a functional market.[225] This criticism, though, is based upon a flawed premise. In particular, it fails to account for the fact that form contracts constitute a low degree of procedural unconscionability.[226] In the context of the sliding-scale approach, a finding of pure procedural unconscionability would require deficiencies far beyond the mere use of a form contract. Even adhesion would not be sufficient. A court would need to face a situation more like Kho or like the car dealership employee arbitration example given in Part III.C.1, where, in addition to adhesion, terms were hidden in tiny font and blocks of legalese; the vulnerable party had no time or opportunity to review the contract; questions were discouraged; and the party was required to sign or risk losing their job.[227] Such abuses go far beyond the use of a form contract.

Another common criticism suggests that pure procedural unconscionability is unnecessary because other contract law doctrines already protect against significant procedural abuses.[228] This criticism, though, fails to recognize the limits of those other contract law doctrines. As discussed above, doctrines such as duress, incompetence, and fraudulent misrepresentation leave gaps that a flexible unconscionability doctrine is well-suited to fill.[229]

Commentators have raised other practical problems regarding the idea of pure procedural unconscionability. Some have argued that it is unlikely to be litigated. Jeffrey Stempel, for instance, argues that it is unlikely that businesses will act so egregiously as to merit a finding of pure procedural unconscionability.[230] This claim, though, is dubious. Think, for instance, of some of the exploitive contract formation processes canvassed in this Note. And in any case, there is no harm in having pure procedural unconscionability as a safety net, even if courts rarely have to use it. More convincing is Melissa Lonegrass’s argument that cases of pure procedural unconscionability are unlikely to be brought if the terms of the agreement are not unconscionable.[231] Again, though, this claim is not obvious. Businesses and employers regularly employ terms that give them various advantages over consumers and employees.[232] While these terms may not be illegal or unfair in the abstract, a consumer or employee might nevertheless feel they were unfairly imposed and should not be enforced. And courts might agree.

Another practical concern about pure procedural unconscionability is that the policy would serve no fruitful purpose. Lonegrass argues that permitting pure procedural unconscionability would at best lead businesses to utilize disclosures or give consumers more time to consider the transaction—processes that would not actually improve the contracting process.[233] Lonegrass supports this argument with empirical work, which suggests that consumers are not in a good position to understand contracts, even if they have the opportunity to read those agreements.[234] This argument certainly has some bite. Still, it is not entirely convincing.

First, allowing findings of pure procedural unconscionability would at least put businesses and employers on guard, and this is preferable to the alternative, laissez-faire policy. Indeed, there is something fatalistic, even paternalistic, about giving up on policing against significant procedural abuses because most consumers would not understand or read the contracts they are forced to sign anyway. Moreover, it seems desirable—as a matter of a matter of justice and judicial integrity—to protect consumers and employees who suffer significant procedural abuse, even if the consumer or employee in a particular case would have still signed the contract in the absence of such abuse. At the very least, it seems desirable to incentivize fairer contract formation processes, which could enhance the perceived legitimacy of our economic and legal system and deter some businesses and employers from including particularly one-sided terms in their contracts.

Still, there is a second reason for doubting Lonegrass’s argument. By focusing only on consumer form contracts,[235] Lonegrass underestimates the potential for procedural abuses in nonconsumer contexts. It is no coincidence that Kho was an employment case; employers have a long-standing relationship with their employees, one that leverages a dramatic power indifference. The nature of the employment relationship creates distinctive perils and incentives that Lonegrass’s argument, which focuses on the consumer context, fails to take into account.

Beyond Lonegrass’s critique that pure procedural unconscionability would lead to meaningless reform, a final counterargument suggests that pure procedural unconscionability would be pointless because without substantive unconscionability there is really no harm. This argument, however, fails to appreciate that procedural abuse is a harm in its own right. It also underestimates the extent to which terms of a contract can be harmful, even if they are not substantively unconscionable.

First, consider the harm of procedural abuse. Significant oppression and deceptive contracting processes, even if they do not rise to the level of duress or fraud, strike at an individual’s ability to freely and autonomously structure their legal relationships.[236] Indeed, insofar as contracts represent a way to privately order relationships, including the rights and obligations that obtain between parties, it is deeply problematic if one party is put into a position where they do not know what their rights and obligations are. Likewise, contracts empower parties to privately negotiate around democratically arrived-at rights.[237] Think here, for example, of Kho, in which the arbitration agreement required the worker to give up their right to government aid in resolving wage disputes.[238] It is unsettling if one party browbeats or deceives another into giving up such public rights, even if the terms of the agreement might otherwise be acceptable.[239]

Second, the idea that there is no harm in cases of pure procedural unconscionability also underestimates the extent to which there can be substantive contractual harm in the absence of substantive unconscionability. That is, even if a term does not rise to the level of unconscionability or unreasonableness, it might still be deeply disadvantageous to a consumer or worker. Think here of forum selection and arbitration clauses, which make it much more difficult for individuals to vindicate their legal rights; or think of penalty clauses, which often take consumers by surprise; or think of terms that allow one party to unilaterally modify terms in the contract. Such provisions can significantly shift the legal risks involved in a transaction. They should not be imposed through abusive contractual processes.

There is thus good reason to expand the sliding scale to encompass findings of unconscionability based upon severe procedural unconscionability alone. Expanding the sliding scale in this way would allow the unconscionability doctrine to function more flexibly, serving the interests of procedural fairness, autonomy, contractual liberty, and judicial integrity, and preventing legitimate harms to vulnerable parties.

Conclusion

The sliding-scale concept has become particularly important in modern unconscionability jurisprudence. Indeed, since 2000, it has grown to become the prominent approach that courts in America take when analyzing unconscionability. In California, the sliding-scale concept has been around since unconscionability was codified; however, its application has tended to be limited to cases in which significant substantive unconscionability compensates for weak procedural unconscionability. This tendency to prioritize the substantive-to-procedural side of the sliding scale accords with the way courts and commentators have generally conceptualized unconscionability. Still, more recently, California has applied the sliding scale to find contracts unconscionable based primarily on their procedural deficiencies. This trend is desirable. In fact, this Note has argued, not only is such a bidirectional sliding scale justified as a matter of law and policy, but California courts ought to go further. They ought to apply the sliding scale both bidirectionally and also permit findings of unconscionability based upon significant procedural or substantive abuse alone. Such a broad application of the unconscionability doctrine is arguably consistent with the text and purpose of Section 1670.5. It would also advance multiple values: serving the end of judicial integrity; enhancing the unconscionability doctrine’s ability to serve as a flexible safety net; and promoting autonomy, contractual liberty, fair exchange, and social welfare. Kho should be a beginning, not an end.

Copyright © 2024 David Beglin, J.D., University of California, Berkeley, School of Law, 2024. I am deeply grateful to Christina Chung and Catherine Fisk for prompting me to work on this project in the first place and for multiple rounds of crucial feedback. Thanks also to Berkeley Law’s Center for Law and Work for providing a crucial context in which to do this research, and thanks to all the editors at the California Law Review for their time, effort, and valuable support throughout the process. Lastly, this paper was written in my personal capacity while I was a student at Berkeley Law and does not reflect the opinions of my employer.

           [1].     Brian M. McCall, Demystifying Unconscionability: A Historical and Empirical Analysis, 65 Vill. L. Rev. 773, 805, 841 (2020); see also 7 Joseph M. Perillo, Corbin on Contracts § 29.3 (2023).

           [2].     See McCall supra note 1, at 786; 7 Joseph M. Perillo, Corbin on Contracts § 29.2 (2023); 8 Richard A. Lord, Williston on Contracts § 18:5 (1990).

           [3].     See, e.g., Peter D. Roos, The Doctrine of Unconscionability: Alive and Well in California, 9 Cal. W. L. Rev. 100, 108–13 (1972) (discussing the early cases in which courts applied the Uniform Commercial Code’s unconscionability doctrine, all of which concern consumer protection).

           [4].     Perillo, supra note 1; Lord, supra note 2.

           [5].     See infra Part I.D.

           [6].     See, e.g., 8 Richard A. Lord, Williston on Contracts § 18:10.

           [7].     See id. (discussing substantive unconscionability generally); see also Sanchez v. Valencia Holding Co., 353 P.3d 741, 748 (Cal. 2015) (describing substantive unconscionability as involving terms that are “overly harsh,” “unduly oppressive,” or “so one-sided as to shock the conscience”).

           [8].     Lord, supra note 6; McCall, supra note 1, at 787.

           [9].     Melissa T. Lonegrass, Finding Room for Fairness in Formalism – The Sliding Scale Approach to Unconscionability, 44 Loy. U. Chi. L.J. 1, 8 (2012); Amy J. Schmitz, Embracing Unconscionability’s Safety Net Function, 58 Ala. L. Rev. 73, 91 (2006).

         [10].     Lonegrass, supra note 9, at 12.

         [11].     Id. at 7 (explaining that “the very courts employing [the sliding-scale] approach have failed to examine its merits”).

         [12].     A HeinOnline search for articles published between 2000 and 2023 with “unconscionability” in the title led to 123 results. By contrast, a HeinOnline search for articles published between 2000 and 2023 with both “unconscionability” and “sliding scale” in the title led to 1 result: Melissa Lonegrass’s 2012 inquiry into the sliding-scale approach. (Search conducted on Jan. 21, 2023.) See also Lonegrass, supra note 9, at 7 (“Most major treatises acknowledge the sliding-scale approach to unconscionability and its variations as alternatives to the more traditional unconscionability framework. However, beyond bare recognition, these alternatives to the traditional unconscionability approach remain grossly under-analyzed.”).

         [13].     McCall, supra note 1, at 796.

         [14].     A Westlaw search conducted on November 22, 2022, for cases from all states with the phrases “unconscionability” and “sliding scale” yielded 430 results. Of these 430 cases, 329 were California cases. The state with the most cases after California was New Jersey, with nineteen cases. It is noteworthy that New Jersey and at least ten other states that showed up in the Westlaw search adopted the sliding-scale approach independently of California, suggesting that these results were not just the result of language that is biased towards California cases.

         [15].     6 P.3d 669 (Cal. 2000).

         [16].     Armendariz has influenced or led to the development of the sliding-scale approach in at least nine other jurisdictions, more than any other case I was able to locate. See Brown ex rel. Brown v. Genesis Healthcare Corp., 724 S.E.2d 250, 289 n.140 (W.Va. 2011); Romano ex rel. Romano v. Manor Care, Inc., 861 So.2d 59, 62 (Fla. 2003); Zobrist v. Verizon Wireless, 822 N.E.2d 531, 541 (Ill. 2004); Gonski v. Second Judicial Dist. Court of State ex rel. Washoe, 245 P.3d 1164, 1170 (Nev. 2010), overruled by U.S. Home Corp. v. Michael Ballesteros Tr., 415 P.3d 32, 42 (2018); Hayes v. Oakridge Home, 908 N.E.2d 408, 420–21 (Ohio 2009) (Pfeifer, J. dissent); Narayan v. Ritz-Carlton Dev. Corp., 350 P. 3d 995, 1004 (Haw. 2015); Damico v. Lennar Carolinas, L.L.C., 879 S.E.2d 746, 755 (S.C. 2022); Ayala v. Cont’l Serv.’s, 2008 WL 4069456, at *3 (Wash. Ct. App. 2008); Cordova v. World Fin. Corp. of N.M., 208 P.3d 901, 909 (N.M. 2009).

         [17].     OTO, L.L.C. v. Kho, 447 P.3d 680, 684 (Cal. 2019).

         [18].     See id. at 703–05 (Chin, J., dissenting) (explaining that the proposition that significant procedural unconscionability can compensate for weak substantive unconscionability was dicta in the cases cited for that proposition); see also infra Part I.D.

         [19].     See Kho, 447 P.3d at 701–04 (Chin, J., dissenting) (arguing that Kho is inconsistent with California’s unconscionability jurisprudence); see also Brief of the Cato Institute as Amicus Curiae at 14–15, OTO, L.L.C v. Kho, No. 19-875 (U.S. June 8, 2020) (cert. denied).

         [20].     Questions like these underlie a recent split among California courts about the extent to which “fine-print terms” can be unconscionable, regardless of their content—an issue that will be heard by the California Supreme Court this year. Compare Davis v. TWC Dealer Grp., 41 Cal. App. 5th 662, 674 (2019) (finding substantive unconscionability in part because the terms were “so small as to challenge the limits of legibility”) (citing Kho, 447 P.3d at 693) with Fuentes v. Empire Nissan, Inc., 90 Cal. App. 5th 919, 928–29, 934 (2023), cert. granted, 533 P.3d 194 S280256 (Cal. Aug. 9, 2023) (holding that fine-print terms are only a matter of procedural unconscionability, and thus enforcing an arbitration agreement that was unreadable because it lacked substantive unconscionability).

         [21].     See, e.g., McCall, supra note 1, at 788 (explaining the eighteenth-century emergence of the values of autonomy and freedom of contract, and explaining that the “modern doctrine of unconscionability was, unlike its Roman Law ancestor, strongly rooted in the idea that some defect in the bargaining process was a necessary condition for a court to refuse to enforce an agreed term, even if the term was grossly unfair”).

         [22].     Id. at 786; Perillo, supra note 2; Lord, supra note 2.

         [23].     McCall, supra note 1, at 785 (“Even in the nineteenth century when English and American courts had seemed to abandon the older tradition of granting relief . . . in the case of greatly disproportionate exchanges, remedies were sometimes granted . . . in cases of hard bargains; the difference was that courts claimed they were not acting on fact of the unfair bargain itself but on the basis of some flaw in contract formation . . . .”); see also Perillo supra note 2.

         [24].     The phrase “covert tools” comes from the principal architect of the U.C.C., Karl Llewellyn. Karl N. Llewellyn, Book Review, 52 Harv. L. Rev. 700, 702–03 (reviewing O. Prausnitz, The Standardization of Commercial Contracts in English and Continental Law (1937)) (“[W]e have developed a whole series of semi-covert techniques for somewhat balancing these bargains . . . Covert tools are never reliable tools.”).

         [25].     John A. Spanogle, Jr., Analyzing Unconscionability Problems, 117 U. Pa. L. Rev. 931, 934 (1969); McCall, supra note 1, at 785.

         [26].     Lonegrass, supra note 9, at 47; PERILLO, supra note 2.

         [27].     Arthur Allen Leff, Unconscionability and the Code—The Emperor’s New Clause, 115 U. Pa. L. Rev. 485, 487 (1967) (“If reading this section makes anything clear it is that reading this section makes nothing clear about the meaning of ‘unconscionable’ except perhaps that it is a pejorative.”).

         [28].     U.C.C § 2-302, cmt. 1 (Am. L. Inst. & Unif. L. Comm’n 1977).

         [29].     See Lonegrass, supra note 9, at 8. See generally Leff, supra note 27; Spanogle, supra note 25; M. P. Ellinghaus, In Defense of Unconscionability, 78 Yale L.J. 757 (1969).

         [30].     See Lonegrass, supra note 9, at 8; Leff, supra note 27, at 487.

         [31].     See Spanogle, supra note 25, at 950.

         [32].     Id. at 950–51.

         [33].     Id. at 952.

         [34].     See Leff, supra note 27, at 487 (explaining, in relation to substantive unconscionability, that a court “may legitimately be interested . . . in what [contracts] provide”); McCall, supra note 1 at 787–88 (conceptualizing substantive unconscionability as a reflection of the concept of unconscionability’s historical focus on fair exchange); Schmitz, supra note 9, at 74 (describing the historical focus of unconscionability around “protecting humanity’s natural, or innate, sense of justice”); De La Torre v. CashCall, Inc., 422 P.3d 1004, 1010 (Cal. 2018) (explaining that part of the justification for unconscionability is “to protect social welfare”).

         [35].     See Leff, supra note 27, at 487 (connecting the notion of procedural unconscionability to contract law defenses like fraud and duress and the court’s “legitimate” interest in “the way agreements come about”); Spanogle, supra note 25, at 935 (describing the UCC’s unconscionability doctrine as providing an opportunity to transform the notion of procedural unconscionability); Richard A. Epstein, Unconscionability: A Critical Reappraisal, 18 J. L. & Econ. 293, 294–95, n.7 (1975) (connecting the value of the unconscionability doctrine to its ability to police procedural abuses that undermine freedom of contract).

         [36].     See Spanogle, supra note 25, at 950.

         [37].     Id. at 968 (explaining that “freedom of contract includes the ability to co-determine terms, and . . . if this ability is denied, the resulting unilaterally determined terms will be subject to special scrutiny.”).

         [38].     Roos, supra note 3, at 100.

         [39].     Id.

         [40].     Id. at 101–04; Harry G. Prince, Unconscionability in California: A Need for Restraint and Consistency, 46 Hastings L.J. 459, 490 (1995).

         [41].     Roos, supra note 3, at 102; Prince, supra note 40, at 491.

         [42].     Prince, supra note 40, at 491.

         [43].     Id.

         [44].     Cal. Dep’t of Consumer Aff.’s, Report to Edmund G. Brown, Jr., Governor of California, on Enrolled Bill A.B. 510 1 (1979).

         [45].     Id.; see also J. Fenton, Digest of A.B. 510, in 4 Statutes of Cal. and Dig. of Measures 240, 240 (Gregory, 1979).

         [46].     See Fenton, supra note 45.

         [47].     Cal. Legislature, Assembly Daily J., Report on A.B. 510, 1979–1980 Reg. Sess. 9231 (1979); Cal. Civ. Code § 1670.5.

         [48].     Id.

         [49].     Id.; see also Prince, supra note 40, at 492.

         [50].     Cal. Dep’t of Consumer Aff.’s supra note 44.

         [51].     Letter from Assemblyman Jack R. Fenton, Chairman, Assembly Judiciary Committee, to Edmund G. Brown, Jr., Governor of California, at 2 (Sept. 13, 1979).

         [52].     See Morris v. Redwood Empire Bancorp, 128 Cal. App. 4th 1305, 1316 (2005) (describing the purpose of Section 1670.5 as being to serve as a “judicial ‘safety valve’”).

         [53].     Fenton, supra note 45.

         [54].     Compare id. with Prince, supra note 40, at 493 (suggesting a narrower interpretation of the purpose of Section 1670.5).

         [55].     Letter from Assemblyman Jack R. Fenton, Chairman, Assembly Judiciary Committee, to Edmund G. Brown, Jr., Governor of California, at 2 (Sept. 13, 1979) (emphasis in letter).

         [56].     See Graham v. Scissor-Tail, Inc., 623 P.2d 165, 172–73 (Cal. 1981) (en banc); see also Roos, supra note 3, at 104 (describing the case law as of 1972 and explaining that “[t]he recent California decisions applying the unconscionability doctrine invariably involve adhesion”).

         [57].     Graham, 623 P.2d at 167–68.

         [58].     Id.

         [59].     Id. at 176–77.

         [60].     Id. at 172–73.

         [61].     Id.

[62].     Id. at 171–72.

         [63].     Id. at 171–72, 176–77.

         [64].     135 Cal. App. 3d 473 (1982).

         [65].     Id. at 493.

         [66].     Id. at 486–94. Compare id. with Graham, 623 P.2d 165 at 172–73.

         [67].     A & M Produce, 135 Cal. App. 3d at 486.

         [68].     Id.

         [69].     Id. at 487.

         [70].     Compare id. with OTO, L.L.C. v. Kho, 447 P.3d 680, 690 (2019).

         [71].     A & M Produce, 135 Cal.App.3d at 487.

         [72].     See id.

         [73].     Id. at 491 (“Although the procedural aspects of unconscionability are present in this case, we suspect the substantive unconscionability of the disclaimer and exclusion provisions contributed equally to the trial court’s ultimate decision.”); see also Kho, 447 P.3d at 704–05 (Chin, J. dissenting) (explaining that A & M Produce’s articulation of the sliding scale was dictum).

         [74].     While Graham fell out of favor, it is worth noting that it is still recognized as an alternative framework in California. De La Torre v. CashCall, Inc., 422 P.3d 1004, 1013–14 (2018).

         [75].     2 Cal. App. 4th 76, 79 (1991).

         [76].     This is based upon a review of all early unconscionability cases citing A & M Produce.

         [77].     Carboni, 2 Cal.App.4th at 83.

         [78].     Id. at 86.

         [79].     Id. at 84.

         [80].     Of the early (pre-2000) cases, a Westlaw search of cases citing A & M Produce and including that case’s “sliding scale” language produces seven California cases. Of those cases, only one occurred after Carboni was decided. See Westlye v. Look Sports, Inc., 17 Cal. App. 4th 1715, 1736 (1993) (citing Kurashige v. Indian Dunes, Inc., 200 Cal. App. 3d 606, 613 (1988), for A & M Produce’s “sliding scale” language but not applying it to the case). I’ve chosen to look at pre-2000 cases, because after 2000, the California Supreme Court decided Armendariz v. Found. Health Psychcare Serv.’s, Inc., 6 P.3d 669 (Cal. 2000), significantly altering California’s unconscionability doctrine jurisprudence. See infra Part II.D.2.

         [81].     Whereas only one court cited A & M Produce after Carboni, a Westlaw search for cases citing Carboni with the terms “sliding scale” or the phrase “the greater the degree of substantive unconscionability” yielded six pre-2000 cases that invoked Carboni’s more-substantive-less-procedural sliding-scale concept. See Ellis v. McKinnon Broad. Co., 18 Cal. App. 4th 1796, 1804 (1993); Shaffer v. Superior Court, 33 Cal. App. 4th 993, 1000 (1995); Ilkhchyooyi v. Best, 37 Cal. App. 4th 395, 410 (1995); American Software, Inc. v. Ali, 46 Cal. App. 4th 1386, 1391 (1996); Armendariz v. Found. Health Psychcare Serv.’s, Inc., 80 Cal. Rptr. 2d 255, 265 (1998) rev’d on other grounds Armendariz v. Found. Health Psychcare Serv.’s Inc., 6 P.3d 669 (Cal. 2000)); Kinney v. United HealthCare Serv.’s, Inc., 70 Cal. App. 4th 1322, 1329 (1999).

         [82].     6 P.3d 669 (2000).

         [83].     Id. at 693–94.

         [84].     Id. at 698–99.

         [85].     Id. (emphasis added).

         [86].     This claim is based on a review of California Supreme Court cases citing A & M Produce.

         [87].     See, e.g., Perdue v. Crocker National Bank, 702 P.2d 503, 511–12, n.9 (Cal. 1985); see also Engalla v. Permanente Med. Grp., Inc., 938 P.2d 903, 924–25 (Cal. 1997) (applying Graham without citing A & M Produce).

         [88].     In a review of reported cases citing either Graham or A & M Produce, for example, I found twenty-one cases applying Graham to arbitration agreements before 1997, while I only found two cases applying A & M Produce.

         [89].     Spinello v. Amblin Ent., 29 Cal. App. 4th 1390, 1395 (1994).

         [90].     See, e.g., Harper v. Ultimo, 113 Cal. App. 4th 1402, 1406 (2003) (“The question of the unconscionability of arbitration clauses is analyzed in terms of procedural and substantive unconscionability.”).

         [91].     This is based on a review of cases citing Graham. The last cases citing Graham for unconscionability were Murphy v. Check n’ Go, 156 Cal. App. 4th 138, 145 (2007) and Bruni v. Didion, 160 Cal. App. 4th 1272, 1289, 1291–94 (2008). Notably both cases applied the reasonable expectations prong of Graham, not the unconscionability prong itself.

         [92].     See, e.g., McCall, supra note 1, at 809 (reviewing all the reported unconscionability cases decided between January 1, 2013, and December 31, 2017, and finding that half of the state court cases—about 130 out of 260—concerned arbitration agreements).

         [93].     See Armendariz v. Found. Health Psychcare Serv.’s Inc., 6 P.3d 669, 689–690 (Cal. 2000).

         [94].     See OTO, L.L.C. v. Kho, 447 P.3d 680, 703–04 (Cal. 2019) (Chin, J., dissenting) (arguing that the idea that significant procedural unconscionability can allow courts to refuse to enforce a contract with a relatively low degree of substantive unconscionability is a novel concept in California that only appears in dicta and is contrary to longstanding principles concerning substantive unconscionability).

         [95].     See, e.g., Gentry v. Superior Court, 165 P.3d 556, 574–75 (Cal. 2007) (“[A] finding of procedural unconscionability does not mean that a contract will not be enforced, but rather that courts will scrutinize the substantive terms of the contract to ensure that they are not manifestly unfair or one-sided.”).

         [96].     See Kho, 447 P.3d at 686–87.

         [97].     Id. at 684–85.

         [98].     Id. at 690–92.

         [99].     Id. at 693.

      [100].     See Graham v. Scissor-Tail, Inc., 623 P.2d 165, 172 (Cal. 1981) (en banc) (holding that “a contract of adhesion is fully enforceable according to its terms . . . unless certain other factors are present”); Gentry v. Superior Court, 165 P.3d 556, 572–73 (Cal. 2007) (“Ordinary contracts of adhesion, although they are indispensable facts of modern life that are generally enforced . . . contain a degree of procedural unconscionability . . . and bear within them the clear danger of oppression and overreaching.”) (internal quotes omitted).

      [101].     Kho, 447 P.3d at 697–98.

      [102].     See supra note 35 and accompanying text.

      [103].     Kho, 447 P.3d at 702 (Chin, J., dissenting); see also Brief of the Cato Institute as Amicus Curiae at 14–15, OTO, LLC v. Kho, No. 19-875 (U.S. June 8, 2020) (cert. denied) (arguing that the majority in Kho distorted principles of unconscionability to get around the Federal Arbitration Act).

      [104].     See supra notes 11–12 and accompanying text. Notably, the only major sustained analysis of the sliding-scale concept focused on the substantive side of the sliding scale, largely neglecting the way that sliding scale was applied in Kho. See Lonegrass, supra note 9, at 29, 45–46, 58 (arguing that the sliding scale is justified largely because of the way it allows courts to closely scrutinize form contracts, aligning the doctrine with empirical evidence that consumers are not positioned to understand form contracts and that the marketplace does not appropriately regulate form contracts).

      [105].     See supra notes 34–35 and accompanying text.

      [106].     Carboni v. Arrospide, 2 Cal. App. 4th 76 (1991).

      [107].     Id. at 83–84, 86.

      [108].     Id. at 85–86.

      [109].     Lonegrass, supra note 9, at 10 (explaining that “courts historically have been unwilling to find the procedural prong satisfied by the mere fact that the contract is a typical contract of adhesion”).

      [110].     Id. at 55; see generally Schmitz, supra note 9, at 75 (arguing for the need to increase the unconscionability doctrine’s flexibility, so it can more effectively protect “societal values and norms of morality, fairness, and equality”).

      [111].     Seana Valentine Shiffrin, Paternalism, the Unconscionability Doctrine, and Accommodation, 29 Phil. & Pub. Aff.’s. 205, 206 (2000) (explaining that a common criticism of the unconscionability doctrine is that it is paternalist); Horatio Spector, A Contractarian Approach to Unconscionability, 81 Chi.-Kent L. Rev. 95, 98–99 (arguing against the idea of pure substantive unconscionability on the basis of its paternalism).

      [112].     Gentry v. Superior Court, 165 P.3d 556, 572–73 (Cal. 2007).

      [113].     See Lonegrass, supra note 9, at 55.

      [114].     See Maxwell v. Fid. Fin. Serv.’s, 907 P.2d 51, 59 (Ariz. 1995).

      [115].     Cal. Civ. Code § 1670.5, cmt. 1.

      [116].     Cal. Civ. Code § 1670.5, cmt. 1.

      [117].     See Campbell Soup Co. v. Wentz, 172 F.2d 80, 83 (3rd Cir. 1948); see also Spanogle, supra note 25, at 950.

      [118].     Leff, supra note 27, at 501–04 (describing the cases from UCC Section 2-302’s official comments and emphasizing how little they have to do with procedural abuse, while highlighting the presence of form contracts throughout the cases).

      [119].     See supra Part I.B.

      [120].     See supra Part I.B.

      [121].     See, e.g., Morris v. Redwood Empire Bancorp, 128 Cal. App. 4th 1305, 1316 (2005) (describing § 1670.5’s unconscionability doctrine’s flexibility as “necessary to its use as a judicial ‘safety valve’ to prevent gross injustice”).

      [122].     See id. at 1317–19; De La Torre v. CashCall, Inc., 422 P.3d 1004, 1013–14 (Cal. 2018).

      [123].     Graham v. Scissor-Tail, Inc., 623 P.2d 165, 172–173 (Cal. 1981) (en banc); see also Purdue v. Nat’l Crocker Bank, 702 P.2d 503, 511–12, n.9 (Cal. 1985) (explaining that “Graham v. Scissor-Tail, Inc. comports somewhat more closely to the California precedent”).

      [124].     See Graham, 623 P.2d at 172 (“Adhesion is fully enforceable according to its terms . . . unless certain other factors are present . . . .”); see also Gentry v. Superior Court, 165 P.3d 556, 572–73 (Cal. 2007) (“Ordinary contracts of adhesion, although they are indispensable facts of modern life that are generally enforced . . . contain a degree of procedural unconscionability even without any notable surprises, and ‘bear within them the clear danger of oppression and overreaching.’”).

      [125].     Russell Korobkin, Bounded Rationality, Standard Form Contracts, and Unconscionability, 70 U. Chi. L. Rev. 1203, 1203 (2003) (“More than thirty years ago, W. David Slawson estimated that 99 percent of all contracts did not resemble the Platonic ideal of a list of jointly negotiated terms but were instead presented by one party to the other on a pre-printed form. If anything, the dominance of form contracts over negotiated contracts has increased in the intervening decades.”).

      [126].     See, e.g., Lonegrass, supra note 9, at 29–34 (discussing research on the “psychological” barriers to assent in the context of form contracts).

      [127].     See id. at 35–38 (discussing research that suggests the self-regulating market model is false); Korobkin, supra note 125, at 1243–44 (discussing the way in which cognitive behavioral research about consumers’ “bounded rationality” undermines economic theories that suggest markets will discipline businesses with respect to consumer form contracts).

      [128].     Lonegrass, supra note 9, at 58.

      [129].     See Schmitz, supra note 9, at 75.

      [130].     See supra Part I.D.1.

      [131].     OTO, L.L.C. v. Kho, 447 P.3d 680, 703–04 (Cal. 2019) (Chin, J., dissenting).

      [132].     Brief of the Cato Institute as Amicus Curiae at 14–15, OTO, LLC v. Kho, No. 19-875 (U.S. June 8, 2020) (cert. denied) (arguing that the majority in Kho distorted principles of unconscionability to get around the Federal Arbitration Act).

      [133].     Kho, 447 P.3d at 697–98.

      [134].     Id. at 126–29.

      [135].     Elisa Nadeau, Easily Shocked? At Least for Wage Claims, California Supreme Court Lowers Standards for Unconscionability in Arbitration Agreements, Littler (Sept. 18, 2019), https://www.littler.com/publication-press/publication/easily-shocked-least-wage-claims-california-supreme-court-lowers [https://perma.cc/6N2L-UL6X].

      [136].     One might worry about increasing the ability of the judiciary to review contracts for unconscionability. It is worth noting, though, that the procedural-to-substantive sliding scale increases this ability only in the context of contracts whose formation process is substantially flawed. In this respect, the traditional worry about judges infringing on freedom of contract and autonomy are mitigated in the contexts in which the procedural-to-substantive sliding scale applies. For more engagement with concerns about expanding the unconscionability doctrine in this way, see infra Part II.B.3.

      [137].     See supra notes 116–18 and accompanying text.

      [138].     Cal. Civ. Code § 1670.5, cmt. 1 (emphasis added).

      [139].     Id.

      [140].     Id.

      [141].     Leff, supra note 27, at 499; Spanogle, supra note 25, at 948.

      [142].     See Res. Mgmt. Co. v. Weston Ranch and Livestock Co., 706 P.2d 1028, 1043 (Utah 1985).

      [143].     See, e.g., OTO, L.L.C. v. Kho, 447 P.3d 680, 690 (Cal. 2019).

      [144].     Cal. Civ. Code § 1670.5, cmt. 1.

      [145].     See Kho, 447 P.3d at 697–98.

      [146].     Cal. Civ. Code § 1670.5, cmt. 1; see also Kho, 447 P.3d at 697–98 (“[A]n unconscionability analysis must be sensitive to context,” including “any procedural unconscionability in its formation.”).

      [147].     See supra Part I.B.

      [148].     Letter from Assemblyman Jack R. Fenton, Chairman, Assembly Judiciary Committee, to Edmund G. Brown, Jr., Governor of California, at 2 (Sept. 13, 1979).

      [149].     Cal. Dep’t of Consumer Aff.’s, supra note 44, at 1.

      [150].     Kho, 447 P.3d at 703–04 (Chin, J., dissenting).

      [151].     See id.

      [152].     Id.

      [153].     Id.

      [154].     Id. at 703–05.

      [155].     See Schmitz, supra note 9, at 75 (“Unconscionability’s value derives from its appropriately contextual concern for societal fairness norms.”); Ellinghaus, supra note 29, at 759–60 (arguing that the open-textured nature of the unconscionability standard is essential to its purpose).

      [156].     McCall, supra note 1, at 824 (finding that contrary to “the myth that the unconscionability doctrine is unpredictable and inconsistent,” the “results of cases involving the doctrine seem highly predictable”); see also Larry A. DiMatteo & Bruce Louis Rich, A Consent Theory of Unconscionability: An Empirical Study of Law in Action, 33 Fla. St. Univ. L. Rev. 1067, 1107–110 (2006) (finding numerous predictive factors in the context of findings of unconscionability).

      [157].     De La Torre v. CashCall 422 P.3d 1004, 1021–1022 (Cal. 2018) (referring to the “cautious tread” of the courts with respect to applying the unconscionability doctrine). Far from judicial overreach, some commentators have worried that courts apply the unconscionability doctrine too cautiously. See, e.g., Schmitz, supra note 9, at 75–76.

      [158].     See Kho, 447 P.3d at 704–05 (Chin, J., dissenting).

      [159].     See Armendariz v. Found. Health Psychcare Serv.’s Inc., 6 P.3d 669, 690–691 (Cal. 2000); Baltazar v. Forever 21, Inc., 367 P.3d 6, 11–12 (Cal. 2016).

      [160].     See Sonic-Calabasas A, Inc. v. Moreno, 247 P.3d 130, 145–46 (Cal. 2011), rev’d Sonic-Calabasis A, Inc. v. Moreno 311 P.3d 184 (Cal. 2013) (finding a “significant element of procedural unconscionability” based upon the fact that the contract term was imposed as a condition of employment).

      [161].     Kho, 447 P.3d at 690–91.

      [162].     This is reflected in the reported cases that have cited to Kho, none of which have refused to enforce a contract based only upon its being an employment contract of adhesion.

      [163].     See supra Part I.B. See also Prince, supra note 40, at 491–93 (suggesting that the legislative history of California’s unconscionability doctrine, both before and after AB 510 was enacted, revolved around consumer protection); Roos, supra note 3, at 108–11 (reviewing extant case law on U.C.C. Section 2-302, and showing that all of the cases revolved around consumer protection).

      [164].     See supra Part I.D.2.

      [165].     Lonegrass, supra note 9, at 19.

      [166].     See id. at 12 (“[U]nder the sliding-scale approach, the two prongs are viewed in tandem, permitting the court to make a finding of unconscionability if the overall weight of the facts and circumstances favors intervention.”).

      [167].     Gentry v. Superior Court, 165 P.3d 556, 573 (Cal. 2007).

      [168].     See Maxwell v. Fid. Fin. Serv.’s, 907 P.2d 51, 59 (Ariz. 1995), (interpreting UCC Section 2-302 and explaining that the tendency of courts to always require procedural unconscionability is “more coincidental than doctrinal”).

      [169].     Cal. Civ. Code § 1670.5, cmt. 1.

      [170].     Id.

      [171].     See Spanogle, supra note 25, at 948 (explaining that “oppression” can be construed in terms of substantive abuse, without procedural issues being required). Of course, one might emphasize the conjunction—oppression and unfair surprise. One might thus read the text as suggesting that the goal is to prevent oppression only when it is coupled with unfair surprise. This, however, seems like an unduly cramped reading of the statute, one that is at odds with the idea that the unconscionability is meant to serve as a flexible safety net. See Morris v. Redwood Empire Bancorp, 128 Cal. App. 4th 1305, 1316 (2005) (describing the unconscionability doctrine’s flexibility as “necessary to its use as a judicial ‘safety valve’ to prevent gross injustice”); see also supra Part I.B. It seems more natural to read Section 1670.5 as suggesting that the goal of the unconscionability doctrine is to prevent both oppression and unfair surprise, as independent vectors of injustice.

      [172].     Campbell Soup Co. v. Wentz, 172 F.2d 80, 83 (3rd Cir. 1948); see also Spanogle, supra note 25, at 950; Res. Mgmt. Co. v. Weston Ranch and Livestock Co., 706 P.2d 1028, 1043 (Utah 1985).

      [173].     Wentz, 172 F.2d at 81.

      [174].     Id. at 83.

      [175].     Id.

      [176].     Id.

      [177].     Id. at 83.

      [178].     Id. at 84.

      [179].     See Leff, supra note 27, at 501–04 (emphasizing that none of the comment cases involved any serious procedural issues; and that while they involved form contracts, the form contracts at issue were not adhesive or particularly offensive).

      [180].     See Schmitz, supra note 9, at 107 (“Courts increasingly overlook the [unconscionability] doctrine’s ability to catch cases of contractual unfairness that slip through [the] rigid two-prong analysis.”); see supra Part I.B. (arguing that Section 1670.5 was meant to apply broadly and to serve as a flexible safety net).

      [181].     See Cal. Dep’t of Consumer Aff.’s, supra note 44, at 1 (describing the scheme AB 510 addressed as involving “elderly or poor homeowner[s] who [are] pressured and deceived by a door-to-door salesperson”).

      [182].     See supra Part I.B.

      [183].     Letter from Assemblyman Jack R. Fenton, Chairman, Assembly Judiciary Committee, to Edmund G. Brown, Jr., Governor of California, at 2 (Sept. 13, 1979).

      [184].     See supra Part I.B.

      [185].     See, e.g., Lonegrass, supra note 9, at 57; Schmitz, supra note 9, at 94–95; Epstein, supra note 35, at 294, 306.

      [186].     See, e.g., Epstein, supra note 35, at 294; Spector, supra note 111, at 98; Gentry v. Superior Court, 165 P.3d 556, 573–74 (Cal. 2007) (“Thus, a conclusion that a contract contains no element of procedural unconscionability is tantamount to saying that, no matter how one-sided the contract terms, a court will not disturb the contract because of its confidence that the contract was negotiated or chosen freely . . . .”).

      [187].     See, e.g., Lonegrass, supra note 9, at 57 (“A sliding-scale approach that continues to require some evidence of process failure accommodates formalist concerns by preventing judicial overreaching into freely negotiated contracts . . . .”); Schmitz, supra note 9, at 94.

      [188].     See supra notes 156–57 and accompanying text.

      [189].     McCall, supra note 1, at 824 (finding that contrary to “the myth that the unconscionability doctrine is unpredictable and inconsistent,” the “results of cases involving the doctrine seem highly predictable”); see also DiMatteo & Rich, supra note 156, at 1107–10 (finding numerous predictive factors in the context of findings of unconscionability).

      [190].     Perhaps too cautiously. See Schmitz, supra note 9, at 75–76.

      [191].     De La Torre v. CashCall, Inc., 422 P.3d 1004, 1021–22 (Cal. 2018).

      [192].     Lonegrass, supra note 9, at 19 (explaining that “even though the single-prong approach has the potential to transform the doctrine of unconscionability, it is narrowly applied by modern courts”).

      [193].     See supra note 186 and accompanying text.

      [194].     Id.

      [195].     Maxwell v. Fid. Fin. Serv.’s, 907 P.2d 51, 59 (Ariz. 1995).

      [196].     Hume v. U.S., 142 U.S. 406, 411 (1889).

      [197].     One might worry about cases in which we know the contract came about through a fair process. In such cases, the premise that the severely unfair terms indicate procedural deficiencies would be defeated, and so, at least if we accept the idea that pure substantive unconscionability is justified only because it suggests procedural deficiencies, a court should not find the contract unconscionable. Notably, though, this concession does not undermine the larger point, which is that permitting pure substantive unconscionability is not necessarily at odds with the values of autonomy and freedom of contract.

      [198].     See Schmitz, supra note 9, at 104–05 (advocating for a clearer adoption of principles of fair exchange, regardless of procedural constraints); see also McCall, supra note 1, at 827.

      [199].     Cf. Carboni v. Arrospide, 2 Cal. App. 4th 76, 85–86 (1991) (finding a 200 percent interest rate on a $99,000 consumer loan unconscionable in the context of an adhesion contract); Maxwell, 907 P.2d at 59–60 (finding a financing contract for a nonfunctional water heater, secured with a lien against the person’s home, which required the homeowner to ultimately pay about half the value of their home, potentially unconscionable, even in the absence of procedural abuse).

      [200].     172 F.2d 80, 83 (3rd Cir. 1948).

      [201].     U.S. v. Bethlehem Steel Corp., 315 U.S. 289, 326 (1942) (Frankfurter, J., dissenting) (“[I]s there any principle which is more familiar and more firmly embedded in the history of Anglo-American law than the basic doctrine that the courts will not permit themselves to be used as instruments of inequity and injustice?”); see also Shiffrin, supra note 111, at 235 (“The state has at least permission and perhaps a deontological commitment not to assist grossly unfair treatment of its citizens by another.”).

      [202].     Lonegrass, supra note 9, at 22–24 (discussing the lack of sustained inquiry into the theoretical justifications for pure substantive unconscionability and noting that “[t]he merits of a procedural unconscionability-alone approach . . . remain even more mysterious”).

      [203].     Cal. Civ. Code § 1670.5, cmt. 1.

      [204].     See supra note 139 and accompanying text.

      [205].     Cal. Civ. Code § 1670.5, cmt. 1.

      [206].     See supra notes 140–42 and accompanying text.

      [207].     See supra note 143 and accompanying text.

      [208].     It is worth adding that even if that test is read to exclude pure procedural unconscionability, it is not clear that Section 1670.5’s comments imply that this test is the only approach that courts should take when assessing unconscionability. The comments, after all, call it the “basic test,” which could be read to suggest that it is simply the general approach envisioned by the drafters, but not the only one. Cal. Civ. Code § 1670.5, cmt. 1. In this respect, other parts of Section 1670.5’s comments, including their reference to empowering courts to police “contracts or clauses,” discussed above, arguably provide justification for cases of pure procedural unconscionability, even if the “basic test” only supports an approach that emphasizes substantive unconscionability.

      [209].     Cal. Civ. Code § 1670.5, cmt. 1.

      [210].     See supra Part II.B.2.

      [211].     These facts are taken from Fuentes v. Empire Nissan, Inc., No. 20STCV35350, 2021 WL 11581409 at *4–6 (Cal. Super. June 8, 2021), which found that such a contract was unconscionable. Id. at *9. Compare id. with Fuentes v. Empire Nissan, Inc., 90 Cal. App. 5th 919, 928 (2023), cert. granted, 533 P.3d 194 S280256 (Cal. Aug. 9, 2023) (reversing the previous decision for lack of substantive unconscionability).

      [212].     This paragraph provides one way to understand a recent controversy over whether “fine-print terms” are substantively unconscionable. One court has recently argued that in a case like that analyzed here, there is no substantive unconscionability, and so the arbitration agreement should be upheld. Fuentes, 90 Cal. App. 5th at 919. This court found that whether terms are “fine-print” is a procedural issue, and it reversed a lower court and disagreed with another appellate court, both of which held that “fine-print terms” go to substantive unconscionability. Id.; see also Fuentes, 2021 WL 11581409, at *7; Davis v. TWC Dealer Grp., Inc., 41 Cal. App. 5th 662, 674 (2019). But as the reasoning in this paragraph brings out, the distinction between substantive and procedural unconscionability is not so clean. “Fine-print terms” might be one way to capture the idea that certain terms are too one-sided to be enforced if they are imposed upon a party through a contracting process ridden with procedural abuse, even if those terms are not substantively unconscionable in their own right.

      [213].     See supra Part I.B.

      [214].     Prince, supra note 40, at 492–93.

      [215].     See supra Part I.B.

      [216].     See A & M Produce v. FMC Corp., 135 Cal. App. 3d 473, 486 (1982) (citing earlier authorities for the distinction between substantive and procedural unconscionability); Leff, supra note 27, at 487; Spanogle, supra note 25, at 932.

      [217].     Letter from Assemblyman Jack R. Fenton, Chairman, Assembly Judiciary Committee, to Edmund G. Brown, Jr., Governor of California (Sept. 13, 1979) (describing the purpose of AB 510 as making “all unconscionable contracts voidable and also [to provide] that unconscionable provisions in a consumer contract are unlawful”).

      [218].     Ellinghaus, supra note 29, at 759–61 (explaining that flexibility is a key virtue of the unconscionability doctrine); Schmitz, supra note 9, at 102 (highlighting the importance of flexibility for the unconscionability doctrine to fulfill its safety net purpose); Epstein, supra note 35, at 304 (explaining that one of the strengths of the unconscionability doctrine is its flexibility).

      [219].     See Epstein, supra note 35, at 301–02; see also Melvin A. Eisenberg, The Bargain Principle and Its Limits, 95 Harv. L. Rev. 741, 755 (1982).

      [220].     Epstein, supra note 35, at 302 (arguing that the unconscionability doctrine should be applied to police for duress, fraud, and incompetence without demanding specific proof for any of them); see also Schmitz, supra note 9, at 102–03 (arguing that allowing the unconscionability doctrine to police procedural abuses alone would serve its flexible safety net function).

      [221].     See supra Part II.B.1.

      [222].     See supra Part II.B.1.

      [223].     See, e.g., Fuentes v. Empire Nissan, Inc., 90 Cal. App. 5th 919, 936 (2023) (upholding an arbitration agreement, despite very significant procedural unconscionability); see also Fuentes v. Empire Nissan, Inc., No. 20STCV35350, 2021 WL 11581409, at *4–6 (Cal. Super. June 8, 2021) (describing in more detail the procedural unconscionability at stake in that agreement).

      [224].     U.S. v. Bethlehem Steel Corp., 315 U.S. 289, 326 (1942) (Frankfurter, J., dissenting).

      [225].     Trudy Nobles Sargent, Unconscionability Redefined: California Imposes New Duties on Commercial Parties, 35 Hastings L.J. 161, 164 n.22 (1983); Carol B. Swanson, Unconscionable Quandary: UCC Article 2 and the Unconscionability Doctrine, 31 N.M. L. Rev. 359, 367 (2001); John E. Murray, Jr., An Effective Article 2 of the Uniform Commercial Code: Who Is Responsible, 11 Duq. Bus. L.J. 123, 127 (2009); Lonegrass, supra note 9, at 58; Fuentes, 90 Cal. App. 5th at 929.

      [226].     See Gentry v. Superior Court, 165 P.3d 556, 572–73 (Cal. 2007).

      [227].     See supra note 161 and accompanying text for a description of Kho; see supra Part III.C.1 for the discussion of the example involving a virtually unreadable contract.

      [228].     Swanson, supra note 224, at 367–68; Res. Mgmt. Co. v. Weston Ranch and Livestock Co., Inc., 706 P.2d 1028, 1043 (Utah 1985).

      [229].     See supra notes 218–19 and accompanying text.

      [230].     Jeffrey W. Stempel, Arbitration, Unconscionability, and Equilibrium: The Return of Unconscionability as a Counterweight to Arbitration Formalism, 19 Ohio State J. Dispute Resolution 757, 796 (2004).

      [231].     Lonegrass, supra note 9, at 24–25.

      [232].     See Leff, supra note 27, at 544–46 (satirically imagining dialogue involving a business owner explaining his business purpose for including a one-sided term).

      [233].     Lonegrass, supra note 9, at 58.

      [234].     Id. at 29–34.

      [235].     See id. at 58 (“If the deficiencies in consent could be remedied by providing consumers with streamlined forms, additional information disclosures, and time to consider the transaction, then invalidating contracts on the basis of procedural unconscionability alone would encourage merchants to engage in behaviors that improve the overall contracting process. But the evidence suggests that while the complexity of forms and pressures of the contracting environment may exacerbate failures in consumer decision making, more time and information does not cure them.”).

      [236].     See W. David Slawson, Binding Promises: The Late 20th-Century Reformation of Contract Law 143 (1996) (explaining that “a high degree of procedural unconscionability is tantamount to fraud”).

      [237].     Margaret Jane Radin, Reconsidering Boilerplate: Confronting Normative and Democratic Degradation, 40 Cap. U. L. Rev. 617, 633 (2012).

      [238].     OTO, L.L.C. v. Kho, 447 P.3d 680, 686–88 (Cal. 2019) (describing the government-aided process the employer’s arbitration agreement required Kho to give up).

      [239].     See id. at 136 (“Although the same contract terms might pass muster under less coercive circumstances, a worker who is required to trade the Berman process for arbitration should at least have a reasonable opportunity to understand the bargain he is making.”).