Evangelina Yanez Fuentes applied for a job at Empire Nissan and was given an employment application packet, which included a document titled “Applicant Statement and Agreement.” This document contained an arbitration provision requiring arbitration of all disputes arising from her employment. The agreement was printed in a very small, blurry font that was nearly illegible, consisting of a dense, lengthy paragraph filled with complex sentences, legal jargon, and statutory references.
Fuentes was given only five minutes to review the entire packet, was told to hurry because the drug testing facility was closing, and was informed that the documents related to her application, references, and drug testing. She was not told about the arbitration clause, given a chance to ask questions, or provided a copy after signing. The agreement also stated that any modifications must be in writing and signed by the company’s president.
Later, while employed, Fuentes signed two nearly identical confidentiality agreements at Empire Nissan’s request. These prohibited her from usurping business opportunities or disclosing confidential information and trade secrets. They allowed Empire Nissan to seek injunctions, legal remedies, and attorney fees in the event of a breach, and stated that they superseded all prior agreements on those topics. The copies in the record lacked the president’s signature.
After working for about two and a half years, Fuentes took medical leave for cancer treatment. A year later, she requested a brief extension, but Empire Nissan terminated her employment. Fuentes then filed a lawsuit alleging wrongful discharge and related claims. Empire Nissan moved to compel arbitration based on the agreement in the application packet.
The trial court denied Empire Nissan’s motion to compel arbitration. It found a high degree of procedural unconscionability due to the agreement’s illegible format, complex language, and the rushed circumstances under which Fuentes signed it without a meaningful opportunity to review or negotiate.
For substantive unconscionability, the court found a low to moderate degree, citing the “fine-print terms” as indicative of unfairness (relying on precedents like OTO, L.L.C. v. Kho (2019) 8 Cal.5th 111,128 and Davis v. TWC Dealer Group, Inc.(2019) 41 Cal.App.5th 662,674) and interpreting the confidentiality agreements as carving out claims (like unfair competition or trade secret violations) that only Empire Nissan would bring, exempting them from arbitration. The court did not address Fuentes’s separate argument that no valid agreement existed due to the illegible format and presentation precluding her assent.
The Court of Appeal reversed the trial court’s denial and directed it to grant the motion to compel arbitration. The Supreme Court of California, in turn, reversed the Court of Appeal’s judgment and remanded the case to the trial court for further proceedings in the case of Fuentes v. Empire Nissan -S280256 (February 2026)
The Court of Appeal held that illegibility and small print were relevant only to procedural unconscionability, not substantive, disagreeing with Davis and criticizing its interpretation of “fine-print terms” in Kho as referring to font size rather than hidden unfair terms. Relying on a strong policy favoring arbitration, it interpreted the confidentiality agreements as requiring arbitration of all claims, including those under them, because any modification to the arbitration agreement needed the president’s signature, which was absent. Thus, it found no substantive unconscionability and declined to address procedural unconscionability.
The Supreme Court disagreed, clarifying that a contract’s format (like small, illegible print) is generally irrelevant to substantive unconscionability, which focuses on the fairness of terms, but high procedural unconscionability (present here due to oppression from the rushed process and surprise from the illegible, jargon-filled text) requires close scrutiny of terms for one-sidedness.
It found ambiguity in whether the confidentiality agreements superseded the arbitration mandate for employer-favored claims, rejecting the Court of Appeal’s pro-arbitration presumption as violating equal treatment of contracts.
The Supreme Court noted an unresolved factual question about whether the president signed the confidentiality agreements, lacking a record because Empire Nissan never raised it below. It also held the Court of Appeal erred by directing arbitration without allowing the trial court to consider Fuentes’s unaddressed argument that no valid contract formed due to precluded assent.
The case was remanded for the trial court to resolve these issues, potentially with further evidence and briefing, emphasizing that even low substantive unconscionability could render the agreement unenforceable given the high procedural element. Chief Justice Guerrero dissented, arguing the agreements required arbitration and that remand was unjustified without party briefing on certain issues.