In Fuentes v. Empire Nissan, Inc., 19 Cal.5th 93 (2026), the California Supreme Court addressed the following question: can an arbitration agreement’s nearly illegible print support a finding of both procedural and substantive unconscionability? The Court held that illegibility can significantly heighten procedural unconscionability, thereby lowering the threshold for the required showing of substantive unconscionability under the sliding scale analysis, but cannot itself render an agreement’s terms substantively unconscionable.
1. Background
When applying to work at Empire Nissan, Evangelina Yanez Fuentes signed a document titled “Applicant Statement and Agreement,” which contained a provision mandating arbitration of “all disputes which may arise out of the employment context.” The document was printed in a very small, blurry font that was nearly unreadable. The arbitration provision itself was a lengthy, densely printed paragraph filled with legal jargon and statutory references, described by the trial court as “visually impenetrable” and at the “limits of legibility.”
The document was part of an employment application packet that Empire Nissan gave Fuentes only five minutes to review. She was told the documents related to her application, that she had to complete them to be hired, and that she should hurry. She was not offered an opportunity to ask questions and did not receive a copy.
Fuentes later signed two confidentiality agreements prohibiting her from disclosing confidential information and trade secrets and from competing with the dealership. After two and a half years, Fuentes went on medical leave for cancer treatment. When she requested a brief extension before returning to work, Empire Nissan terminated her employment. Fuentes then filed suit alleging wrongful discharge and related claims.
The trial court denied Empire Nissan’s motion to compel arbitration, finding a very high degree of procedural unconscionability based on the agreement’s barely legible text and the lack of a meaningful opportunity for her to review or negotiate its terms. The court also found a low to moderate degree of substantive unconscionability, concluding that the agreement’s fine-print terms were indicative of substantive unconscionability and that the confidentiality agreements appeared to carve out from arbitration claims that only Empire Nissan would bring.
Empire Nissan appealed, and the court of appeal reversed. The court concluded that arguments about illegibility go exclusively to procedural unconscionability and, relying on the principle that the law strongly favors arbitration, interpreted the confidentiality agreements as requiring arbitration of claims brought under them. On that basis, it found no substantive unconscionability and directed the trial court to grant Empire Nissan’s motion to compel arbitration.
2. The Supreme Court’s Decision
The California Supreme Court reversed and remanded, clarifying the law on two significant points.
a. Illegibility And Substantive Unconscionability
The Court agreed with the court of appeal that tiny print and an almost illegible format do not indicate substantive unconscionability. An otherwise fair and mutual term is not made substantively unconscionable by being difficult to read. Small font size can require a lesser showing of substantive unconscionability under the sliding scale analysis, but because it does not affect the substance of an agreement’s terms, it cannot render a term substantively unconscionable.
The Court also clarified that “fine-print terms,” as used in OTO, L.L.C. v. Kho, 8 Cal. 5th 11 (2019), refers to substantively unfair or one-sided terms hidden in a legal document, not simply terms printed in a small font.
b. The Confidentiality Agreements And Mutuality
The Court also found that the court of appeal erred by relying on a presumption favoring arbitration over litigation to interpret the confidentiality agreements. The Court reaffirmed that the policy favoring arbitration is not one of promoting arbitration over litigation, but of ensuring that arbitration agreements are treated like other contracts.
Reading the confidentiality agreements’ text, the Court noted that nothing limited Empire Nissan’s right to bring its claims in court. The agreements specified that Empire Nissan could seek any remedies available at law or in equity and that the prevailing party in a “legal action” could recover attorney fees and costs. The Court interpreted “legal action” in its ordinary sense as a court proceeding and found that the agreements’ silence on arbitration suggested the parties did not intend claims under them to be arbitrated.
Reading the agreements together, however, the Court found an ambiguity — the confidentiality agreements stated that they “supersede any and all prior agreements” on the covered subjects, but the arbitration agreement limited modification to writings signed by Empire Nissan’s president. Because the court of appeal’s conclusion lacked an adequate factual foundation on the signature issue, the Court remanded for the trial court to make the relevant findings.
3. Practical Considerations
The Fuentes decision provides important guidance for California employers who use arbitration agreements.
Illegibility is a procedural problem, not a substantive one, but it can still significantly strengthen an unconscionability challenge. To minimize this risk, employers should ensure that arbitration agreements are presented in a legible format and that employees are given adequate time to review them.
Employers should also review their arbitration agreements and any related agreements, such as confidentiality or noncompete agreements, to consider ensuring that the arbitration obligation is genuinely mutual and does not carve out claims that only the employer would bring.
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About The Author
Ryan J. Krueger is a Partner with Sheppard, Mullin, Richter & Hampton LLP in the firm’s Los Angeles office. He specializes in labor and employment matters on behalf of employers, including wage and hour violations, employment discrimination, wrongful termination and sexual harassment. Mr. Krueger has experience in all aspects of employment litigation, including brief writing and oral argument, taking and defending depositions, and negotiating settlements. He has also second chaired multiple trials and arbitrations, and argued before the California Court of Appeal. Mr. Krueger also regularly counsels employers regarding California and federal employment law issues.
Ryan is a co-author of the California’s Private Attorneys General Act (PAGA) Litigation and Compliance Manual, and is a frequent contributor to the California Labor and Employment ALERT Newsletter. He is a co-speaker at the Castle Publications’ Seminars as well as the Labor Law Update for Sheppard.
He received his J.D. from the University of California, Los Angeles and his B.A. from the University of Wisconsin, with distinction. During law school, Mr. Krueger served as extern to the Honorable Morton Denlow, U.S. District Court for the Northern District of Illinois. He is admitted to practice in all California state courts, along with the United States District Court for the Central District of California and the Ninth Circuit Court of Appeals.