30 Cal.Rptr.3d 76 (2005) 36 Cal.4th 148 113 P.3d 1100

DISCOVER BANK, Petitioner,
v.
SUPERIOR COURT of Los Angeles, Respondent;
Christopher Boehr, Real Party in Interest.

No. S113725.

Supreme Court of California.

June 27, 2005.

*77 Kirkland & Ellis, Jeffrey S. Davidson, Rick Richmond, C. Robert Boldt, Amy M. *78 Wilkins, Timothy B. Jafek, Los Angeles; Stroock & Stroock & Lavan and Julia B. Strickland, Los Angeles, for Petitioner.

Morrison & Foerster and Maren E. Nelson for California Bankers Association as Amicus Curiae on behalf of Petitioner.

M. Jane Brady, Attorney General (Delaware); Severson & Werson and William L. Stern, San Francisco, for Robert A. Glen, Delaware State Bank Commissioner as Amicus Curiae on behalf of Petitioner.

Rintala, Smoot, Jaenicke & Rees, G. Howden Fraser, Los Angeles; Wilmer, Cutler & Pickering and Christopher R. Lipsett for American Bankers Association, American Financial Services Association and Consumer Bankers Association as Amici Curiae on behalf of Petitioner.

Gibson, Dunn & Crutcher, Mark E. Weber, Gabriel J. Pasette, Los Angeles; Stokes Lawrence, Kelly T. Noonan and Bradford Axel for AT & T Wireless Services, Inc., as Amicus Curiae on behalf of Petitioner.

Littler Mendelson, Henry D. Lederman, Marissa M. Tirona and James Y. Wu for Ralphs Grocery Company as Amicus Curiae on behalf of Petitioner.

No appearance for Respondent.

Trial Lawyers for Public Justice, F. Paul Bland, Jr., Michael J. Quirk, Arthur H. Bryant, Leslie A. Bailey, Kate Gordon; Strange & Carpenter, Brian R. Strange, Gretchen Carpenter, Los Angeles; Law Offices of Barry Kramer and Barry L. Kramer for Real Party in Interest.

Bramson, Plutzik, Mahler & Birkhaeuser and Robert M. Bramson, Walnut Creek, for National Association of Consumer Advocates as Amicus Curiae on behalf of Real Party in Interest.

Deborah M. Zuckerman, Michael R. Schuster; Kemnitzer, Anderson, Barron & Ogilvie and Mark F. Anderson, San Francisco, for AARP as Amicus Curiae on behalf of Real Party in Interest.

The Sturdevant Law Firm, James C. Sturdevant, San Francisco; Ian Herzog, Santa Monica; Michael Adler; Sharon J. Arkin, Newport Beach; Stuart B. Esner, Los Angeles,; Brian S. Kabateck, Los Angeles; David A. Rosen, Los Angeles; Daniel U. Smith, Kentfield; Christine D. Spagnoli; Lea-Ann Tratten; Steven B. Stevens, Los Angeles, and Scott H.Z. Sumner, Walnut Creek, for Consumer Attorneys of California as Amicus Curiae on behalf of Real Party in Interest.

Ghalchi & Associates, Kamran Ghalchi, Los Angeles; Adhoot & Wolfson, Tina Wolfson, Los Angeles, and Robert Adhoot for Rebecca Shakib and Karen Bernard as Amici Curiae on behalf of Real Party in Interest.

MORENO, J.

This case concerns the validity of a provision in an arbitration agreement between Discover Bank and a credit cardholder forbidding classwide arbitration. The credit cardholder, a California resident, alleges that Discover Bank had a practice of representing to cardholders that late payment fees would not be assessed if payment was received by a certain date, whereas in actuality they were assessed if payment was received after 1:00 p.m. on that date, thereby leading to damages that were small as to individual consumers but large in the aggregate. Plaintiff filed a complaint claiming damages for this alleged deceptive practice, and Discover Bank successfully moved to compel arbitration pursuant to its arbitration agreement with plaintiff.

Plaintiff now seeks to pursue a classwide arbitration, which is well accepted under California law. (See Keating v. Superior Court (1982) 31 Cal.3d 584, 613-614, *79 183 Cal.Rptr. 360, 645 P.2d 1192 (Keating), overruled on other grounds in Southland Corp. v. Keating (1984) 465 U.S. 1, 104 S.Ct. 852, 79 L.Ed.2d 1 (Southland).) But plaintiff's arbitration agreement with Discover Bank has a clause forbidding classwide arbitration. Moreover, the agreement has a Delaware choice-of-law provision. Discover Bank argues that Delaware law allows contracting parties to waive class action remedies. The trial court ruled that the class arbitration waiver was unconscionable and enforced the arbitration agreement with the proviso that plaintiff could seek classwide arbitration. The Court of Appeal, without disputing that such class arbitration waivers may be unconscionable under California law and without addressing the choice-of-law issue, nonetheless held that the Federal Arbitration Act (FAA) (9 U.S.C. § 1 et seq.) preempts the state law rule that class arbitration waivers are unconscionable.

As explained below, we conclude that, at least under some circumstances, the law in California is that class action waivers in consumer contracts of adhesion are unenforceable, whether the consumer is being asked to waive the right to class action litigation or the right to classwide arbitration. We further conclude that the Court of Appeal is incorrect that the FAA preempts California law in this respect. Finally, we will remand to the Court of Appeal to decide the choice-of-law issue.

I. FACTUAL AND PROCEDURAL BACKGROUND

The following undisputed facts are largely drawn from the Court of Appeal opinion. Plaintiff Christopher Boehr obtained a credit card from defendant Discover Bank in April 1986. The Discover Bank cardholder agreement (agreement) governing plaintiff's credit card account contained a choice-of-law clause providing for the application of Delaware and federal law.

When plaintiff's credit card was issued, the agreement did not contain an arbitration clause. Discover Bank subsequently added the arbitration clause in July 1999, pursuant to a change-of-terms provision in the agreement. Relying on the change-of-terms provision, Discover Bank added the arbitration clause by sending to its existing cardholders (including plaintiff) a notice that stated in relevant part: "NOTICE OF AMENDMENT ... WE ARE ADDING A NEW ARBITRATION SECTION WHICH PROVIDES THAT IN THE EVENT YOU OR WE ELECT TO RESOLVE ANY CLAIM OR DISPUTE BETWEEN U.S. BY ARBITRATION, NEITHER YOU NOR WE SHALL HAVE THE RIGHT TO LITIGATE THAT CLAIM IN COURT OR TO HAVE A JURY TRIAL ON THAT CLAIM. THIS ARBITRATION SECTION WILL NOT APPLY TO LAWSUITS FILED BEFORE THE EFFECTIVE DATE."

In addition, the arbitration clause precluded both sides from participating in classwide arbitration, consolidating claims, or arbitrating claims as a representative or in a private attorney general capacity: "... NEITHER YOU NOR WE SHALL BE ENTITLED TO JOIN OR CONSOLIDATE CLAIMS IN ARBITRATION BY OR AGAINST OTHER CARDMEMBERS WITH RESPECT TO OTHER ACCOUNTS, OR ARBITRATE ANY CLAIM AS A REPRESENTATIVE OR MEMBER OF A CLASS OR IN A PRIVATE ATTORNEY GENERAL CAPACITY."

The arbitration agreement also stated that the FAA would govern the agreement: "Your Account involves interstate commerce, and this provision shall be governed by the Federal Arbitration Act (FAA)." "The arbitrator shall follow applicable *80 substantive law to the extent consistent with the FAA and applicable statutes of limitations and shall honor claims of privilege recognized at law." Existing cardholders were notified that if they did not wish to accept the new arbitration clause, they must notify Discover Bank of their objections and cease using their accounts. Their continued use of an account would be deemed to constitute acceptance of the new terms. Plaintiff did not notify Discover Bank of any objection to the arbitration clause or cease using his account before the stated deadline.

On August 15, 2001, Boehr filed a putative class action complaint in superior court against Discover Bank. Plaintiff alleged two causes of action—breach of contract and violation of the Delaware Consumer Fraud Act (Del. Code Ann., tit. 6, §§ 2511-2527). The latter act in part prohibits misrepresentations "of any material fact with intent that others rely upon such concealment, suppression or omission in connection with the sale, lease or advertisement of any merchandise." (Id., § 2513.) He alleged that Discover Bank breached its cardholder agreement by imposing a late fee of approximately $29 on payments that were received on the payment due date, but after Discover Bank's undisclosed 1:00 p.m. "cut-off time." Discover Bank also allegedly imposed a periodic finance charge (thereby disallowing a grace period) on new purchases when payments were received on the payment due date, but after 1:00 p.m. The complaint acknowledged that the contract with Discover Bank provided that the contract was "governed by federal law and the law of Delaware." Plaintiff alleged, however, that "this choice of law provision applies only to plaintiff's substantive claims and not to other issues related to the contract, which plaintiff contends are governed by California or other applicable law."

Discover Bank moved to compel arbitration of plaintiff's claim on an individual basis and to dismiss the class action pursuant to the arbitration agreement's class action waiver.

Plaintiff opposed the motion, contending among other things that the class action waiver was unconscionable and unenforceable under California law.^[1] Discover Bank, on the other hand, argued that the FAA requires the enforcement of the express provisions of an arbitration clause, including class action waivers. Discover Bank contended that under section 2 of the FAA, arbitration agreements should not be singled out for suspect status under state laws applicable only to arbitration provisions.

The trial court initially granted Discover Bank's motion in its entirety under Delaware law. After Discover Bank's motion to compel arbitration was granted, the Fourth District Court of Appeal decided Szetela v. Discover Bank (2002) 97 Cal. App.4th 1094, 118 Cal.Rptr.2d 862 (Szetela), which held, for reasons explained below, that a virtually identical class action waiver was unconscionable. Plaintiff, citing Szetela, moved for reconsideration of that portion of the order enforcing the class action waiver.

The lower court found Szetela constituted new and controlling authority for the proposition that, under California law, an *81 arbitration class action waiver is unconscionable and, thus, unenforceable. The trial court further conducted a choice-of-law analysis and concluded that enforcing the class action waiver under Delaware law would violate a fundamental public policy under California law as articulated in Szetela. Upon determining it would be proper to sever the class action waiver clause from the rest of the arbitration agreement, the trial court struck the class action waiver clause from the agreement, ordered plaintiff to arbitrate his claims individually, and left open the possibility that plaintiff may succeed in certifying an arbitration class under California law.

After the lower court granted plaintiff's motion for reconsideration, Discover Bank filed a writ petition seeking reinstatement of the lower court's original order enforcing the arbitration clause in its entirety by compelling plaintiff to arbitrate on an individual basis and precluding him from participating in class litigation or class arbitration. The Court of Appeal issued an order to show cause.

The Court of Appeal granted Discover Bank's writ. It did not take issue with the premise that class action waivers are unenforceable, at least under some circumstances, under California law and that this rule could override the Delaware choice-of-law provision. But the Court of Appeal held, for reasons elaborated below, that any California rule prohibiting class action waivers was preempted by the FAA, and that Szetela had failed to adequately analyze the federal preemption issue. It therefore upheld the Discover Bank class action waiver. We granted review.

II. DISCUSSION

A. Class Action Law Suits and Class Action Arbitration

Before addressing the questions at issue in this case, we first consider the justifications for class action lawsuits. These justifications were set forth in Justice Mosk's oft-quoted majority opinion in Vasquez v. Superior Court (1971) 4 Cal.3d 800, 808, 94 Cal.Rptr. 796, 484 P.2d 964 (Vasquez): "Frequently numerous consumers are exposed to the same dubious practice by the same seller so that proof of the prevalence of the practice as to one consumer would provide proof for all. Individual actions by each of the defrauded consumers is often impracticable because the amount of individual recovery would be insufficient to justify bringing a separate action; thus an unscrupulous seller retains the benefits of its wrongful conduct. A class action by consumers produces several salutary by-products, including a therapeutic effect upon those sellers who indulge in fraudulent practices, aid to legitimate business enterprises by curtailing illegitimate competition, and avoidance to the judicial process of the burden of multiple litigation involving identical claims. The benefit to the parties and the courts would, in many circumstances, be substantial."

We quoted much of the above language with approval almost 30 years later in Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 445, 97 Cal.Rptr.2d 179, 2 P.3d 27 (Linder). We also quoted with approval Justice Tobriner's concurring opinion in Blue Chip Stamps v. Superior Court (1976) 18 Cal.3d 381, 387, 134 Cal.Rptr. 393, 556 P.2d 755. In the latter case, this court rejected a class action certification against a trading stamp company that allegedly had collected excess taxes, but had given over the excess tax collected to the public treasury and had discontinued the practice before the suit was filed. "Although the majority in Blue Chip Stamps placed utmost significance on the small amount of potential individual recovery (18 Cal.3d at pp. 385-386 [134 Cal.Rptr. 393, 556 P.2d 755]), Justice Tobriner's separate *82 opinion effectively clarified that trial courts remain under the obligation to consider `the role of the class action in deterring and redressing wrongdoing.' (18 Cal.3d at p. 387 [134 Cal.Rptr. 393, 556 P.2d 755] (conc. opn. of Tobriner, J.).) Invoking settled principles, Justice Tobriner emphasized: `A company which wrongfully exacts a dollar from each of millions of customers will reap a handsome profit; the class action is often the only effective way to halt and redress such exploitation. [Citations.] The problems which arise in the management of a class action involving numerous small claims do not justify a judicial policy that would permit the defendant to retain the benefits of its wrongful conduct and to continue that conduct with impunity.'" (Linder, supra, 23 Cal.4th at pp. 445-446, 97 Cal.Rptr.2d 179, 2 P.3d 27.)

These same concerns were acknowledged by the United States Supreme Court: "`The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor.'" (Amchem Products, Inc. v. Windsor (1997) 521 U.S. 591, 617, 117 S.Ct. 2231, 138 L.Ed.2d 689.)

It is this important role of class action remedies in California law that led this court to devise the hybrid procedure of classwide arbitration in Keating, supra, 31 Cal.3d 584, 183 Cal.Rptr. 360, 645 P.2d 1192. In that case, plaintiff 7-Eleven franchisors sought to invalidate an arbitration agreement between them and Southland Corporation and proceed with class action litigation to redress Southland's alleged systemic misconduct. This court held that the arbitration agreement was enforceable for most of the claims. In considering the impact that enforcement of the arbitration agreement would have on class action claims, the Keating court stated: "This court has repeatedly emphasized the importance of the class action device for vindicating rights asserted by large groups of persons. We have observed that the class suit `"both eliminates the possibility of repetitious litigation and provides small claimants with a method of obtaining redress for claims which would otherwise be too small to warrant individual litigation. [Citation.]"' [Citation.] Denial of a class action in cases where it is appropriate may have the effect of allowing an unscrupulous wrongdoer to `retain[] the benefits of its wrongful conduct.' [Citation.] [Moreover,] `[c]ontroversies involving widely used contracts of adhesion present ideal cases for class adjudication; the contracts are uniform, the same principles of interpretation apply to each contract, and all members of the class will share a common interest in the interpretation of an agreement to which each is a party.'" (Keating, supra, 31 Cal.3d at p. 609, 183 Cal.Rptr. 360, 645 P.2d 1192, fn. omitted.)

The Keating court recognized that "[w]ithout doubt a judicially ordered classwide arbitration would entail a greater degree of judicial involvement than is normally associated with arbitration, ideally '"a complete proceeding, without resort to court facilities."' [Citation.] The court would have to make initial determinations regarding certification and notice to the class, and if classwide arbitration proceeds it may be called upon to exercise a measure of external supervision in order to safeguard the rights of absent class members to adequate representation and in the event of dismissal or settlement. A good deal of care, and ingenuity, would be required to avoid judicial intrusion upon the merits of the dispute, or upon the conduct of the proceedings themselves and to minimize *83 complexity, costs, or delay. [Citation.] [¶] An adhesion contract is not a normal arbitration setting, however, and what is at stake is not some abstract institutional interest but the interests of the affected parties." (Keating, supra, 31 Cal.3d at p. 613, 183 Cal.Rptr. 360, 645 P.2d 1192.) Keating's endorsement of classwide arbitration has been echoed by subsequent Court of Appeal decisions. (See, e.g., Sanders v. Kinko's, Inc. (2002) 99 Cal.App.4th 1106, 121 Cal.Rptr.2d 766; Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 78 Cal. Rptr.2d 779.)

B. The Enforceability of Class Action Waivers

Keating judicially authorized classwide arbitration in a case in which the arbitration agreement at issue was silent on the matter. It did not answer directly the question whether a class action waiver may be unenforceable as contrary to public policy or unconscionable. Recent cases have addressed that question. First, the Court of Appeal discussed the validity of a contractual class action waiver outside the arbitration context in America Online, Inc. v. Superior Court (2001) 90 Cal. App.4th 1, 108 Cal.Rptr.2d 699 (America Online). Several former AOL subscribers alleged that AOL had continued to debit their credit cards for monthly service fees after their subscriptions had been canceled. (Id. at p. 5, 108 Cal.Rptr.2d 699.) The plaintiffs filed a class action lawsuit alleging violation of the Consumers Legal Remedies Act (CLRA) (Civ.Code, § 1750 et seq.), the Unfair Business Practices Act and several common law causes of action. The subscription contracts contained Virginia forum selection and choice-of-law provisions. Because Virginia law did not permit consumer class action lawsuits, those provisions were the "functional equivalent" of a waiver of class action lawsuits. (Ibid.)

The America Online court held the forum selection and choice-of-law provisions to be unenforceable. As to the latter, the court stated: "`While "California does not have any public policy against a choice of law provision, where it is otherwise appropriate" [citation] and "choice of law provisions are usually respected by California courts ..." [citation] "an agreement designating [a foreign] law will not be given effect if it would violate a strong California public policy ... [or] `result in an evasion of ... a statute of the forum protecting its citizens.'" [Citation.]'" (America Online, supra, 90 Cal.App.4th at p. 13, 108 Cal. Rptr.2d 699, quoting Hall v. Superior Court (1983) 150 Cal.App.3d 411, 416-417, 197 Cal.Rptr. 757; see also Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 466, 11 Cal.Rptr.2d 330, 834 P.2d 1148 (Nedlloyd) [an arm's length choice-of-law provision between commercial entities will not be enforced if it violates a fundamental California public policy and California has materially greater interests than the chosen state].)

The America Online court found in the CLRA a statute that overrode the choice-of-law provision. The court noted that the statute contained an antiwaiver provision, Civil Code section 1751, which states: "Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void." The court reasoned that following Virginia law would result in a waiver of the CLRA in light of the fact that the equivalent Virginia consumer protection statute, the Virginia Consumer Protection Act of 1977 (Va.Code Ann. § 59.1-196), was significantly weaker. (America Online, supra, 90 Cal.App.4th at pp. 15-16, 108 Cal.Rptr.2d 699.) Among the most important differences between the two statutes was the lack of a provision permitting class action relief in the Virginia statute. (Id. at *84 p. 17, 108 Cal.Rptr.2d 699.) After quoting the passage in Vasquez, supra, 4 Cal.3d at page 808, 94 Cal.Rptr. 796, 484 P.2d 964, regarding the importance of class actions in vindicating consumer rights quoted above (ante, 30 Cal.Rptr.3d at pp. 81-82, 113 P.3d at pp. 1104-06), the court stated: "That this view has endured over the last 30 years is of little surprise given the importance class action consumer litigation has come to play in this state. In light of that history, we cannot accept AOL's assertion that the elimination of class actions for consumer remedies if the forum selection clause is enforced is a matter of insubstantial moment. The unavailability of class action relief in this context is sufficient in and by itself to preclude enforcement of the ... forum selection clause." (America Online, supra, 90 Cal.App.4th at pp. 17-18, 108 Cal.Rptr.2d 699, fn. omitted.)

In Szetela, supra, 97 Cal.App.4th at page 1097, 118 Cal.Rptr.2d 862, the court considered a class arbitration waiver. Plaintiff was a member of a class of credit cardholders seeking action against Discover Bank for improperly charging fees for exceeding their credit limits and imposing other penalties. He sued for breach of contract, breach of the covenant of good faith and fair dealing, fraudulent or negligent misrepresentation, and deceptive business practices. The arbitration clause and class arbitration waiver were very similar to those at issue in the present case. The trial court granted Discover Bank's motion for arbitration. Plaintiff recovered $29 in an individual arbitration and then appealed the trial court order compelling arbitration.

The court held that the class arbitration waiver was unenforceable. It first recognized that unconscionability was one reason to refuse to enforce an arbitration waiver. (Szetela, supra, 97 Cal.App.4th at p. 1099, 118 Cal.Rptr.2d 862.) It found procedural unconscionability in the adhesive nature of the contract. (Id. at p. 1100, 118 Cal.Rptr.2d 862.) The court also found substantive unconscionability in the imposition of a one-sided and oppressive class action waiver provision. "This provision is clearly meant to prevent customers, such as Szetela and those he seeks to represent, from seeking redress for relatively small amounts of money, such as the $29 sought by Szetela. Fully aware that few customers will go to the time and trouble of suing in small claims court, Discover has instead sought to create for itself virtual immunity from class or representative actions despite their potential merit, while suffering no similar detriment to its own rights. [¶] ... The clause is not only harsh and unfair to Discover customers who might be owed a relatively small sum of money, but it also serves as a disincentive for Discover to avoid the type of conduct that might lead to class action litigation in the first place. By imposing this clause on its customers, Discover has essentially granted itself a license to push the boundaries of good business practices to their furthest limits, fully aware that relatively few, if any, customers will seek legal remedies, and that any remedies obtained will only pertain to that single customer without collateral estoppel effect. The potential for millions of customers to be overcharged small amounts without an effective method of redress cannot be ignored. Therefore, the provision violates fundamental notions of fairness. [¶] ... This is not only substantively unconscionable, it violates public policy by granting Discover a `get out of jail free' card while compromising important consumer rights." (Szetela, supra, 97 Cal.App.4th at p. 1101, 118 Cal.Rptr.2d 862; see also Ting v. AT & T (9th Cir.2003) 319 F.3d 1126, 1151 [concluding class action waivers in CLRA claim violated California law, relying in part on Szetela]; Ingle v. Circuit City *85 Stores, Inc. (9th Cir.2003) 328 F.3d 1165, 1176 [same].)

Turning to the present case, we note that plaintiff does not plead a CLRA cause of action and so does not invoke its antiwaiver provision;^[2] nor does he seek recovery under any other California statute as to which a class action remedy is essential. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 100-101, 99 Cal.Rptr.2d 745, 6 P.3d 669 (Armendariz).) Rather, plaintiff contends that class action or arbitration waivers in consumer contracts, and in this particular contract, should be invalidated as unconscionable under California law.

"To briefly recapitulate the principles of unconscionability, the doctrine has `"both a `procedural' and a `substantive' element," the former focusing on "`oppression'" or "`surprise'" due to unequal bargaining power, the latter on "`overly harsh'" `or "`one-sided'" results.' [Citation.] The procedural element of an unconscionable contract generally takes the form of a contract of adhesion, `"which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it."' ... [¶] Substantively unconscionable terms may take various forms, but may generally be described as unfairly one-sided." (Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979 (Little), cert. den. sub nom. Auto Stiegler, Inc. v. Little (2003) 540 U.S. 818, 124 S.Ct. 83, 157 L.Ed.2d 35.)

We agree that at least some class action waivers in consumer contracts are unconscionable under California law. First, when, a consumer is given an amendment to its cardholder agreement in the form of a "bill stuffer" that he would be deemed to accept if he did not close his account, an element of procedural unconscionability is present. (Szetela, supra, 97 Cal.App.4th at p. 1100, 118 Cal.Rptr.2d 862.) Moreover, although adhesive contracts are generally enforced (Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 817-818, 171 Cal.Rptr. 604, 623 P.2d 165), class action waivers found in such contracts may also be substantively unconscionable inasmuch as they may operate effectively as exculpatory contract clauses that are contrary to public policy. As stated in Civil Code section 1668: "All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law." (Italics added.)

Class action and arbitration waivers are not, in the abstract, exculpatory clauses. But because, as discussed above, damages in consumer cases are often small and because "`[a] company which wrongfully exacts a dollar from each of millions of customers will reap a handsome profit'" (Linder, supra, 23 Cal.4th at p. 446, 97 Cal.Rptr.2d 179, 2 P.3d 27), "`the class action is often the only effective way to halt and redress such exploitation.'" (Ibid.) Moreover, such class action or arbitration waivers are indisputably one-sided. "Although styled as a mutual prohibition on representative or class actions, it is difficult to envision the circumstances under which the provision might negatively impact Discover [Bank], because credit card companies typically do not sue their customers in class action lawsuits." (Szetela, supra, 97 Cal.App.4th at p. 1101, 118 Cal.Rptr.2d 862.) Such one-sided, exculpatory contracts in a contract of adhesion, *86 at least to the extent they operate to insulate a party from liability that otherwise would be imposed under California law, are generally unconscionable.

We acknowledge that other courts disagree. Some courts have viewed class actions or arbitrations as a merely procedural right, the waiver of which is not unconscionable. (See, e.g., Strand v. U.S. Bank National Association ND (N.D. 2005) 693 N.W.2d 918, 926 (