A California appellate court reversed a trial court’s holding that an arbitration agreement was unconscionable because it required a party to litigate a matter without any "right to discovery or appeal." As the Court explained, arbitration does not deprive a party of its right to discovery.

In Rodgers v. Homes, No. B199193, 2008 WL 2568482 (Cal. Ct. App. June 30, 2008), Christopher and Lisa Rodgers signed a contract to purchase a home from Davidon Homes (Davidon), and the contract contained an arbitration agreement. Lisa subsequently came down with a serious medical condition, so the Rodgers attempted to rescind the purchase contract with Davidon. Davidon responded that unless Lisa was unable to work for three consecutive months, it would consider the Rodgers to be in breach and would keep their deposit pursuant to the liquidated damages clause in the contract.

The Rodgers sued, and Davidon moved to compel arbitration pursuant to the arbitration agreement in the purchase contract. The trial court denied Davidon’s motion, holding that even though much of the arbitration provision was in all capital letters and bold type, it was procedurally unconscionable because it was not prominently displayed and was in "legal language not easy to understand." The trial court found the arbitration provision substantively unconscionable because it "forces the matter to litigation, while depriving the Rodgers[] of their right to discovery or appeal."

On appeal, the Court reversed the trial court and compelled arbitration. The arbitration agreement provided that the arbitration would be conducted under the rules of the American Arbitration Association, which expressly authorize the arbitrator to order discovery. The Court held that "although somewhat more constrained than discovery permitted in a civil action proceeding in court, the Rodgers[] nevertheless have the ability to conduct discovery sufficient to adequately arbitrate their claims."

The Rodgers also argued, for the first time on appeal, that the purchase contract’s limitation on punitive damages supported a finding of unconscionability. The Court held that this argument was waived, but even if it was not waived, the limitation on punitive damages was binding on both parties and did not deprive either party of statutory punitive damages, so it was not an unconscionable limitation.

In addition, the Rodgers argued that the arbitration agreement was substantively unconscionable because it restricted their right to a jury trial. The Court held that the argument "border[ed] on the frivolous," since the "very essence of arbitration . . . is the use of an alternative, nonjury decisionmaking process that provides the parties with a faster, more efficient dispute resolution process."

Finally, the Court held that "[w]hen parties agree to submit their disputes to arbitration they select a forum . . . in which, as they well know, disputes are not resolved by juries."