California Supreme Court Addresses Enforceability of “Visually Impenetrable” Arbitration Provision

On February 3, 2026, the California Supreme Court issued its decision in Fuentes v. Empire Nissan, Inc. In this decision, which dealt with an illegible arbitration provision, the Supreme Court reversed the lower court and held a contract’s “legibility” does not affect its substantive terms.

Background

Plaintiff Evangelina Yanez Fuentes was an employee of Empire Nissan. As part of her onboarding with the company, she signed a document titled “Applicant Statement and Agreement,” which contained a mandatory arbitration provision. The provision was printed in small font, and its text was so blurry it was unreadable.

After her employment ended, Ms. Fuentes sued Empire Nissan, alleging wrongful discharge and related claims. Empire Nissan moved to compel arbitration, which the Los Angeles Superior Court denied on the basis that the arbitration provision—which it deemed “visually impenetrable”—was “substantively unconscionable.”

On appeal, the Court of Appeal reversed, holding that “tiny and unreadable print” was a problem of “procedural unconscionability,” not to be “double counted” as “substantive unconscionability.”  According to the Court of Appeal, because there was no showing of both procedural and substantive unconscionability required to invalidate an arbitration agreement under existing law, the motion to compel arbitration should have been granted.The Supreme Court reversed the Court of Appeal, finding that the “tiny print” was not indicative of substantive unconscionability and by itself, could not render the arbitration provision substantively unconscionable. Instead, the Supreme Court found the print reflected a “high degree” of procedural unconscionability (such that a “low degree” of substantive unconscionability would suffice) and directed the trial court to review the terms of the provision for such substantive unconscionability.

In so ruling, the Supreme Court also addressed the interplay between Fuentes’s arbitration provision and confidentiality agreements, which ostensibly contained a one-sided carve-out from arbitration for Empire Nissan’s claims of “unfair competition, trade secrets, and confidentiality.” Although the Supreme Court deferred ruling on the underlying factual issue, it noted that such carve outs may raise the specter of substantive unconscionability.

Implications for Employers

In a rapidly evolving California arbitration landscape, the Fuentes decision reemphasizes that California courts require both procedural and substantive unconscionability to invalidate an arbitration agreement.

To that end, California employers should reevaluate how their arbitration agreements are presented. For example, employers should explain to applicants the purpose and effect of arbitration agreements, allow applicants to ask questions, allow applicants to take a reasonable amount of time to review agreements before signing, and provide signed copies to applicants after they sign (all things the employer in this case did not do). The text of the arbitration agreements should, of course, also be legible, printed clearly, and large enough for employees to read.

California employers should also reevaluate the interplay between their confidentiality and arbitration agreements, as one-sided carve outs in a confidentiality agreement may void an otherwise enforceable arbitration agreement.

For more information on how employers may choose to use mandatory arbitration programs or update existing agreements, please contact your Quarles attorney or:

•  Aaron Schu, (619) 243-1574, aaron.schu@quarles.com