Keating v. Superior Court

RICHARDSON, J.

Iconcur with the majority’s conclusions that the arbitration agreement is enforceable and that Southland did not waive its right to arbitration. I itespectfully dissent, however, from the majority’s further holdings that the Franchise Investment Law claims are not subject to arbitration and that class action arbitration is an available valid remedy.

A. Arbitrability of the Franchise Investment Law Claims

Contrary to the majority, I believe that the state cannot immunize certain civil actions from application of the Federal Arbitration Act merely by fashioning, after the Federal Securities Act, a statute regulating franchise investments.

The United States Supreme Court in Wilko v. Swan (1953) 346 U.S. 427 [ 98 L.Ed. 168 , 74 S.Ct. 182 ], held that an arbitration clause contained in a margin agreement was invalid as a forbidden “stipulation” under section 14 of the federal Securities Act of 1933. (15 U.S.C. § 77n.) In so holding, the court observed that two statutory policies were invoked: (1) the Federal Arbitration Act’s emphasis on “the need for avoiding the delay and expense of litigation” (id., at p. 431 [ 98 L.Ed. at p. 174 ], fn. omitted); and (2) the Securities Act’s purpose to protect investors by requiring “full and fair disclosure . .. and to prevent fraud.” (Ibid.) The high court stressed that “[w]hen the security *615 buyer, prior to any violation of the Securities Act, waives his right to sue in courts, he gives up more than would a participant in other business transactions. The security buyer has a wider choice of courts and venue. He thus surrenders one of the advantages the Act gives him and surrenders it at a time when he is less able to judge the weight of the handicap the Securities Act places upon his adversary.” (Id., at p. 435 [98 L.Ed. at pp. 175-176].) In measuring the force of the two policies, the Wilko court thus was required to balance two federal statutes, the Arbitration and the Securities Acts.

The Wilko court identified one important factor in the weighing process, namely, the existence of 15 United States Code section 77v, which establishes an unusually liberal venue provision for Securities Act litigation. This emphasis on venue was subsequently repeated in Scherk v. Alberto-Culver Co. (1974) 417 U.S. 506 [ 41 L.Ed.2d 270 , 94 S.Ct. 2449 ], in which the high court declined to invalidate an arbitration clause in a controversy between foreign and domestic parties concerning an alleged violation of the 1934 Securities Exchange Act. The Scherk court specifically emphasized that the 1934 act’s venue provision (15 U.S.C. § 78aa) “significantly restricts] the plaintiff’s choice of forum” in contrast to section 77v, upon which the court “in particular” relied in Wilko v. Swan. (Id., at p. 514 [ 41 L.Ed.2d at p. 278 ], fn. omitted.)

In contrast, the case before us concerns a state statute which is contrary to the federal law. The Wilko reasoning in balancing between two federal statutes of equal stature thus is not required here. Moreover, unlike the Securities Act of 1933, the state Franchise Investment Law at issue here does not contain a liberal venue provision comparable to that relied on in Wilko . Thus, under the California statute an investor who consents to arbitration, thereby waiving the right to sue, does not forego more than other similarly situated parties to routine business contracts or transactions.

No different result is mandated by section 31512 of the Corporations Code, which provides that “Any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provisions of this law or any rule or order hereunder is void.” Even if the Legislature had intended that this statute be interpreted according to the principles of Wilko v. Swan , the section nonetheless impermissibly conflicts with the Federal Arbitration Act. Section 31512 is therefore void under the supremacy clause (U.S. Const., art. VI, cl. *616 2) to the extent that it purports to restrict otherwise permissible arbitration in actions, as here, involving interstate commerce.

In reaching its conclusion that application of the Federal Arbitration Act here is not required, the majority wholly ignores a substantial line of very respectable authority. These cases, as I now develop, hold that in enacting the Federal Arbitration Act, Congress created national substantive law, which is binding on state courts even in the absence of federal jurisdiction.

In 1959, the United States Court of Appeals for the Second Circuit succinctly expressed the general principle. “We think it is reasonably clear that the Congress intended by the Arbitration Act to create a new body of federal substantive law affecting the validity and interpretation of arbitration agreements.” (Robert Lawrence Company v. Devonshire Fabrics, Inc. (2d Cir. 1959) 271 F.2d 402, 406 , cert. dism. (1960) 364 U.S. 801 [ 5 L.Ed.2d 37 , 81 S.Ct. 27 ], italics added.) The Lawrence court observed: “To be sure much of the Act is purely procedural in character and is intended to be applicable only in the federal courts. But Section 2 declaring that arbitration agreements affecting commerce or maritime affairs are ‘valid, irrevocable, and enforceable’ goes beyond this point and must mean that arbitration agreements of this character, previously held by state law to be invalid, revocable, or unenforceable are now made ‘valid, irrevocable, and enforceable.’ This is a declaration of national law equally applicable in state or federal courts.” (Id., at p. 407, italics added.)

The United States Supreme Court has acknowledged the Lawrence holding only in one instance, where it merely noted that the court of appeals in the case it was then considering had relied upon the Lawrence notion of “national substantive law” to hold that “a claim of fraud in the inducement of the contract generally — as opposed to the arbitration clause itself — is for the arbitrators and not for the courts .... ” (Prima Paint v. Flood & Conklin (1967) 388 U.S. 395, 399-400 [ 18 L.Ed.2d 1270, 1275 , 87 S.Ct. 1801 ].) The high tribunal then affirmed the decision below, “albeit for somewhat different reasons.” (Ibid.) Thus the Supreme Court has never rejected the long standing doctrine that the Arbitration Act created national substantive law applicable in appropriate circumstances in state courts.

The great majority of lower federal and state courts has continued to adhere to the Lawrence holding. (See Annot. (1979) 95 A.L.R.3d 1145 , *617 1151-1161.) A recent expression of this principle is contained in In re Mercury Const. Corp. (4th Cir. 1981) 656 F.2d 933 (en banc) (cert, granted sub nom. Moses H. Cone Memorial Hospital v. Mercury Const. Corp. (1982) 455 U.S. 937 [ 71 L.Ed.2d 647 , 102 S.Ct. 1426 ]) (three questions were presented in the petition for certiorari; none specifically concerns the scope of the Arbitration Act although one involves the district court’s discretion to stay its proceedings pending resolution of identical issues in a state court action involving identical parties). In discussing the application of the Federal Arbitration Act to state and federal actions the Fourth Circuit noted: “By its express language the Federal Act applies where there is ‘[a] written provision in ... a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract .... ’ 9 U.S.C. § 2 . The constitutional validity of such an Act is found in the incontestable federal control over interstate commerce. Prima Paint v. Flood & Conklin, 388 U.S. 395 , 405 .... The Act, however, does not include language conferring independent federal jurisdiction over an action thereunder. In order for a plaintiff to assert rights under it in a federal forum, he must establish an independent jurisdictional basis, such as diversity. [Citations.] But if, assuming diversity of the parties, the action meets the jurisdictional requirements of the Act, that action is enforceable in the state courts as well as in federal courts but in either event it is governed by the federal substantive law developed in connection with the federal Act and not by state law. E.C. Ernst, Inc. v. Manhattan Const. Co., 551 F.2d 1026, 1040 (5th Cir. 1977) (any questions under the Act are matters of ‘federal law’); Robert Lawrence Co. v. Devon-shire Fabrics, Inc., supra, 271 F.2d at 406 ; Pathman Const. Co. v. Knox County Hospital Ass’n., 164 Ind.App. 121 , 326 N.E.2d 844, 851 (1975); Episcopal Housing Corp. v. Federal Ins. Co., 269 S.C. 631, 636 , 239 S.E.2d 647 (1977).” (Id., 656 F.2d at p. 938 , italics in original, fn. omitted.) As described in Lawrence, Congress in enacting the Arbitration Act sought to counteract the hostility of courts and judges to arbitration agreements and to “make the benefits of arbitration generally available to the business world.” (271 F.2d at pp. 406-407; see Prima Paint v. Flood & Conklin, supra, 388 U.S. at p. 405 [ 18 L.Ed.2d at p. 1278 ] [Congress “plainly” had power to legislate over arbitration].)

Despite the majority’s recognition of the large body of law holding that the act is applicable in state courts in appropriate cases, my colleagues seek to create, judicially, an exception for certain state regulatory practices based on some conclusion that Congress did not in *618 tend to preempt the area of franchise regulation. The majority, however, fails to acknowledge that Congress has indeed preempted the field of arbitration as applied to afiy contract in interstate commerce to the extent that title 9 of the United States Code applies. No one has urged before us that there is any basis other than the state regulatory statute upon which to deny application of the Federal Arbitration Act to the contract at issue.

In addition to encouraging the enforcement of arbitration agreements, the Arbitration Act also restricts the benefits of the usually disfavored practice of forum shopping. As the majority recognizes, the likely explanation for the federal district court’s remand of the action here was that complete diversity did not exist because of the presence of California defendants. Had those defendants not been named, which was, of course, well within; a franchisee’s power to choose, the answer would have been easy. The action could have been readily removed to the federal courts on the basis of diversity and the Arbitration Act unquestionably would have applied. It will thus be seen that the majority implicitly makes the existence or nonexistence of federal jurisdiction the determinative factor in the enforcement of the arbitration clause rather than the existence of a “transaction involving commerce . .. . ” In so concluding, the majority ignores the critical distinction which exists in the Arbitration Act between the conferral of federal jurisdiction and the creation of federal substantive law applicable in state courts. This promotes forum shopping.

In a similar context, the court in In re Mercury Const. Corp., supra, specifically observed that, “The addition of the Architect as a party defendant might prevent removal of the state action .. . but it certainly could not frustrate Mercury’s plain, indisputable right to an arbitration of its dispute with the Hospital.” ( 656 F.2d at p. 942 .) The Arbitration Act, construed as national substantive law binding on both federal and state courts, advances consistency.

Finally, I find it significant that sister courts which have specifically considered state statutes analogous to the one before us have found that the Arbitration Act prevails over various state attempts to limit its reach. Thus, in Allison v. Medicab Intern., Inc. (1979) 92 Wn.2d 199 [ 597 P.2d 380 ], the Washington Supreme Court reviewed a claim that an arbitration clause in a franchise agreement was invalid under the state’s franchise act which gave to the state courts jurisdiction for causes of action based on violations of the state act. Finding that inter *619 state commerce was involved, the Allison court rejected the argument that Wilko v. Swan, supra, 346 U.S. 427 , applied to a conflict between a state franchising act and the Federal Arbitration Act. The Allison court instead adopted the weight of authority rule applying the federal act in the face of a contrary state law ( 597 P.2d, at p. 382 ), concluding that “the supremacy clause of the federal constitution must prevail and thus the federal arbitration act requires enforcement of the arbitration clause in the franchise agreement despite the judicial remedies afforded by the Franchise Investment Protection Act.” (Id., at pp. 382-383, italics added.)

In similar fashion, in Network Cinema Corporation v. Glassburn (S.D.N.Y. 1973) 357 F.Supp. 169 , the federal district court granted an order staying proceedings in a Kansas state court pending arbitration of a dispute between franchisor and franchisee. The Kansas court had held that the arbitration clause signed by the parties was not enforceable under state law. The federal court nonetheless found that it was empowered to stay state proceedings “when the dispute in question has been found by the federal court to be subject to the arbitration provisions of 9 U.S.C. § 2 .” (Id., at p. 172; see also Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc. (1977) 67 Cal.App.3d 19, 23-25 [ 136 Cal.Rptr. 378 ], and cases cited therein [“‘The Federal Arbitration Act, declaring arbitration agreement [s/c] affecting [interstate] commerce or maritime affairs to be valid, enforceable, and irrevocable, is a declaration of national law equally applicable in state or federal courts’”]; Fite & Warmath Const. Co., Inc. v. MYS Corp. (Ky. 1977) 559 S.W.2d 729, 734-735 .)

Finally, in Barron v. Tastee-Freez Intern., Inc. (E.D.Wis. 1980) 482 F.Supp. 1213 , the federal district court considered the enforcement of an arbitration clause in the face of a state statute analogous to section 31512, which it characterized as similar to 15 United States Code section 77n. (482 F.Supp. at pp. 1215-1216.) The court felt compelled by the Federal Arbitration Act “to render void any effort made by a state to protect the remedies of the franchise investors” contrary to the federal act in cases in which the transactions related to interstate commerce. (Id., at p. 1217; see also Guinness-Harp Corp. v. Jos. Schlitz Brewing (2d Cir. 1980) 613 F.2d 468, 472 .) “The policy embodied in Title 9 U.S.C. .. . does not depend for its enforceability on the residence of the parties to a contract but rather on the nature of the contract.” (Barron v. Tastee-Freez Intern., Inc., supra, 482 F.Supp. at p. 1217 .)

*620 The majority attempts to remove a state regulatory statute from the purview of the Federal Arbitration Act in cases involving interstate commerce. In my opinion, its chances of surviving federal review are very dubious. I believe section 31512 is void insofar as it attempts to restrict application of the federal act. Contrary to the majority’s assertion, the issue is not the preemption of the field of franchise investment regulation, but rather the clear language of the federal act and the subsequent state and federal court interpretations which consistently demonstrate that the Federal Arbitration Act applies to all claims arising out of transactions in interstate commerce. “Because the United States Arbitration Act is a ¡national substantive law that supplants state arbitration laws, a state court is bound to apply the act if the statutory requisites are present; ...” (Merrill Lynch, Pierce, Fenner, etc. v. Haydu (5th Cir. 1981) 637 F.2d 391, 395 , italics added.) As the majority first acknowledges and then ignores, “The franchise agreements . . . involve interstate commerce and fall within the ambit of the Federal Arbitration Act.” (Ante, pp. 592-593.) The conclusion that the federal act must prevail is logical, consistent and supported by case law, statutory language, and congressional history. California remains one of the United States, and national substantive law must be applied by us in appropriate cases.

B. Class Action Arbitration

The majority also concludes that class action arbitration may be an appropriate procedure and has remanded the case for determination by the trial court. In the absence of either statutory or contractual authority, I disagree with its holding.

Arbitration is a matter of agreement. It is consensual, being an integral part of the contract. In such situations we have said that the parties “may freely delineate the area of its application.” (O’Malley v. Wilshire Oil Co. (1963) 59 Cal.2d 482, 490 [ 30 Cal.Rptr. 452 , 381 P.2d 188 ]; see Reid Burton Const. v. Carpenters Dist. Council, etc. (10th Cir. 1980) 614 F.2d 698 , 702, cert. den. 449 U.S. 824 [ 66 L.Ed. 2d 27 , 101 S.Ct. 85 ].) As á general principle, in considering contract enforcement, “there is perhaps no higher public policy than to uphold and give effect to contracts validly entered into and legally permissible in subject matter.” (Vernon v. Drexel Burnham & Co. (1975) 52 Cal. App.3d 706, 716 [ 125 Cal.Rptr. 147 ].)

*621 In the present case, the contracts of the parties do not provide for class arbitration, nor have the parties subsequently agreed thereto. No statute authorizes a court to order arbitration on a class-wide basis. Nonetheless, the majority concludes that such a procedure is possible in order to prevent repetitive arbitration and to avoid “effectively foreclosing individual claims” in instances where the arbitration contract “may be used to insulate the drafter of an adhesion contract from any form of class proceeding.” (Ante, p. 610.)

A recent New York case examined the propriety of the class action device used in arbitration. Harris v. Shearson Hayden Stone, Inc. (1981) 82 App.Div.2d 87 [ 441 N.Y.S.2d 70 ], weighed the policies favoring class actions and arbitration and concluded that the filing of a class action alleging a broker’s breach of fiduciary duty would not permit avoidance of an agreement to arbitrate. The agreement was contained in a “customer’s agreement” which the brokerage firm required all customers to sign. Citing the consistent holdings of our Courts of Appeal in Vernon v. Drexel Burnham & Co., supra, 52 Cal.App.3d 706, 716 , and Frame v. Merrill Lynch, Pierce, Fenner & Smith (1971) 20 Cal.App.3d 668, 672 [ 97 Cal.Rptr. 811 ], the New York court held that “maintenance of a class action here by assertion of a claim for which a forum is provided elsewhere, would defeat the aim of arbitration, and undercut an avowed purpose of the class action itself — the ‘conservation of judicial effort.’” ( 441 N.Y.S.2d at p. 76 .)

In dissent, Justice Bloom urged that the conflict should be resolved in favor of the class action. Even he, however, expressly rejected the idea of a “class arbitration” saying, “Nor is it an answer to assert that the dispute between plaintiffs and Shearson may be proceeded with as a ‘class arbitration.’ Arbitration does not lend itself to the many subsidiary proceedings incident to an ongoing class action, e.g. determination of whether class action status should be granted, definition of the class, determination of the nature and kind of notice and by whom it should be sent, provision for opting out, etc. In sum, if the matter is to proceed in arbitration it must proceed as an individual claim.” (Id., at p. 79; cf. Coleman v. National Movie-Dine, Inc. (E.D.Pa. 1978) 449 F.Supp. 945, 948 [“Arbitration should not be foreclosed simply by adding persons to a civil action who are not parties to the arbitration agreement because such an inclusion would thwart the federal policy in favor of arbitration. (Citations.)”].) Thus in weighing the policies behind class actions and arbitration, other courts have found that class actions will not prevail where there is an individual arbitration agreement.

*622 In addition to the concerns mentioned by Justice Bloom, other factors belie franchisees’ assertion that class certification would be only a “preliminary” issue. For example, a court, in determining whether class proceedings are appropriate, must be satisfied that there is a “community of interest”; i.e., that common issues predominate over individual issues. (See Code Civ. Proc., § 382; City of San Jose v. Superior Court (1974) 12 Cal.3d 447, 459-460 [ 115 Cal.Rptr. 797 , 525 P.2d 701 , 76 A.L.R.3d 1223 ]; Fed. Rules Civ. Proc., rule 23, 28 U.S.C.) In determining whether a “community of interest” exists, a court must carefully evaluate the nature of the proof that will be presented by the parties (City of San Jose, supra, at p. 460; Abercrombie v. Lum’s Inc. (S.D.Fla. 1972) 345 F.Supp. 387, 390 ), and the parties are likely to devote extensive resources to developing the facts and arguments fully in regard to the usually complex certification issues. (See, e.g., Chance v. Superior Court (1962) 58 Cal.2d 275, 282-287 [ 33 Cal.Rptr. 761 , 373 P.2d 849 ]; Blackie v. Barrack (9th Cir. 1975) 524 F.2d 891, 900-901 .)

Moreover, class action procedures would interfere with the expeditious resolution of the claims. After certification of a class, the court must notify class members1 of the existence of the suit so that they will have the opportunity to “opt out.” (Fed. Rules Civ. Proc., rule 23(c), 28 U.S.C.) Because of the due process safeguards required to keep class members apprised of the course of the litigation, substantial judicial involvement by the court will be required to monitor the progress of the arbitration and potentially will undermine the arbitrator’s discretion. In fact, the court’s due process responsibilities include the duty to “undertake a stringent and continuing examination of the adequacy of representation by the named class representatives at all stages of the litigation.” (N at. Ass’n of Regional Medical Programs, Inc. v. Mathews (D.C.Cir. 1976) 551 F.2d 340, 344 , cert. den. 431 U.S. 954 [ 53 L.Ed. 2d 270 , 97 S.Ct. 2674 ].)

Yet another consideration arises from the fact that unlike settlements reached through arbitration, which are ordinarily not subject to court review on either procedural issues or the merits (see Barrett v. Manufacturers Railway Company (8th Cir. 1972) 453 F.2d 1305, 1307 ), a class action settlement normally does not become final without court approval. (La Sala v. Am. S. & L. Assn. (1971) 5 Cal.3d 864, 872 [ 97 Cal.Rptr. 849 , 489 P.2d 1113 ]; Fed. Rules Civ. Proc., rule 23(e), 28 U.S.C.; In re General Motors Corp. Engine Interchange Lit. (7th Cir. 1979) 594 F.2d 1106 , 1124, cert. den. 444 U.S. 870 [ 62 L.Ed.2d 95 , 100 S.Ct. 146 ].) The court ¡must review the entire proceedings to deter *623 mine if the settlement was fair, reasonable, and adequate in light of the strength of each party’s case (Marshall v. Holiday Magic, Inc. (9th Cir. 1977) 550 F.2d 1173 , 1178-1179), and take evidence on any substantial objection to the proposed settlement brought by any class member. (Mandujano v. Basic Vegetable Products, Inc. (9th Cir. 1976) 541 F.2d 832, 835-836 .)

Finally, the normally “informal” nature of arbitration requires no transcripts. Arbitrators generally need not explain the basis for their decision. (Bernhardt v. Poly graphic Co. (1956) 350 U.S. 198, 203-204 , and fn. 4 [ 100 L.Ed. 199, 205-206 , 76 S.Ct. 273 ].) The absence of a record further complicates the use of class proceedings, because without a record a court may have difficulty in applying an arbitrator’s decision to all class members, since it could not determine whether the arbitrator’s judgment was applicable to each member of the class, or based on equities applicable only to the individual claimant. Similarly, objections to settlements would be difficult to assess.

In addition, arbitrators, of course, are not necessarily either lawyers or judges. Requiring the administration of complex class procedures during arbitration may either make lay experts unavailable as arbitrators as a practical matter, or result in intrusive judicial participation and supervision.

In summary, class procedures would tend to make arbitration inefficient instead of efficient, lengthy instead of expeditious, and procedural instead of informal “‘[A]n arbitration proceeding is, except in specified particulars, outside the court realm and jurisdiction — deliberately so taken out of the court by choice and commitment of the parties. Arbitration is subject to its own rules and practices at variance with court procedures. It is supposed to be a complete proceeding, without resort to court facilities, .... It would be generally incompatible with the nature and scope of arbitration to allow a shift to the court forum . . . .’ (Application of Katz, 3 App.Div.2d 238, ....)” (East San Bernardino County Water Dist. v. City of San Bernardino (1973) 33 Cal.App.3d 942, 950 [ 109 Cal.Rptr. 510 ].)

In my view, because of the complications resulting from continued judicial monitoring, the imposition of class action procedures on the arbitration process would be self-defeating.

*624 Nonetheless, by analogy to consolidated arbitration proceedings, the majority insists that class arbitration is an available remedy. However, several factors make this analogy less than compelling. In Atlas Plastering, Inc. v. Superior Court (1977) 72 Cal.App.3d 63 [ 140 Cal.Rptr. 59 ], Atlas, a general contractor, sought to consolidate arbitration proceedings between itself and! several subcontractors, each of whom had entered into identical arbitration agreements with Atlas. The Atlas court held that, because the parties had not agreed to consolidated proceedings and because consolidation would deprive the individual subcontractors of their right to choose an arbitrator in the manner set forth in the arbitration agreement, the court lacked the power to order consolidated proceedings. (Code Civ. Proc., § 1281.6.) When Atlas was decided, no statute authorized a court to order consolidation of arbitrations.

Following the decision in Atlas, the Legislature enacted Code of Civil Procedure section 1281.3 which specifically authorizes consolidated arbitration at the court’s discretion under certain circumstances. This section was relied upon in Conejo Valley Unified School Dist. v. William Blurock & Partners, Inc. (1980) 111 Cal.App.3d 983 [ 169 Cal. Rptr. 102 ], in which a party to an arbitration agreement was compelled to arbitrate his claim in consolidated proceedings despite the fact that the agreements contained conflicting provisions for choosing an arbitrator. The Conejo court held that section 1281.3 did not create substantive rights, but was a procedural statute and that therefore no constitutional bar to its retroactive application existed.

Unlike the Conejo situation, there is no state statute which permits a court to order arbitration proceedings on a class-wide basis when the contractual arrangement of the parties does not authorize it. The Legislature examined the specific problems of related arbitration proceedings when it permitted the consolidation of arbitration. After scrutinizing these problems the Legislature declined to provide for class arbitration.

Nor, as the majority concedes, is there any federal authority for class arbitration. Although federal courts have ordered consolidated arbitration under the authority of rule 42(a) of the Federal Rules of Civil Procedure, the courts have j attempted to assure each party the right to select an arbitrator and tó express their individual views. (See, e.g., Compania Espanola de Pet., S.A. v. Nereus Ship. (2d Cir. 1975) 527 F.2d 966 , 974-975, cert. den. (1976) 426 U.S. 936 [ 49 L.Ed.2d 387 , 96 S.Ct. 2650 ]; Marine Trading Ltd. v. Ore Intern. Corp. (S.D.N.Y. 1977) *625 432 F.Supp. 683, 685 ; Robinson v. Warner (D.R.I. 1974) 370 F.Supp. 828, 829 .) In fact, the issue of the application of consolidation to arbitration proceedings is not a settled matter in the federal courts. (See Gavlik Construction Co. v. H. F. Campbell Co. (W.D.Pa. 1975) 389 F.Supp. 551, 556 , revd. on other grounds (3d Cir.) 526 F.2d 777 ; see also Robinson v. Warner, supra, 370 F.Supp. at p. 830 .)

In the absence of a statute authorizing class arbitration or agreement of the parties, it is inappropriate in my view for us, judicially, to superimpose such a procedure on the arbitration process over objections of a party to the contract. (Compare, Stevenson v. Com., Dept. of Revenue (1980) 489 Pa. 1 [ 413 A.2d 667 ] [the Pennsylvania Board of Arbitration of Claims Act specifically incorporates procedures embodied in rules of Pennsylvania civil procedure and class action is therefore available to parties appearing before board].)

The majority is compelled to acknowledge that class-wide arbitration “would entail a greater degree of judicial involvement than is normally associated with arbitration . ..(Ante, p. 613.) Nonetheless, it argues that if the alternative would be to require hundreds of individual arbitration proceedings, then such a procedure may be appropriate. I believe, however, that the majority fails to accord proper deference to the recognized principle that arbitration is a favored means of dispute resolution because it permits a nonjudicial, informal, and speedy alternative to litigation. (See, e.g., Taylor v. Crane (1979) 24 Cal.3d 442, 452 [ 155 Cal.Rptr. 695 , 595 P.2d 129 ]; Doers v. Golden Gate Bridge etc. Dist. (1979) 23 Cal.3d 180, 189 [ 151 Cal.Rptr. 837 , 588 P.2d 1261 ]; Aerojet-General Corp. v. American Arbitration Assn. (9th Cir. 1973) 478 F.2d 248 , 251.) The injection of class action procedure into the arbitration process in the absence of either statutory authority or contractual agreement conflicts with these settled principles as well as with the specific contract terms to which the parties agreed. “It is axiomatic that commercial arbitration is to be based on a voluntary agreement of the parties[;] only then can the concept of arbitration be well understood. In other words, nobody should be bound to resort to arbitration unless he has previously agreed to that method of dispute settlement.” (Domke on Commercial Arbitration (1968) § 1.02, p. 5.)

The franchisees here do not contend that they would be unable to proceed individually in separate or consolidated arbitration proceedings. We are not confronted with a situation in which a plaintiff contends that it would be economically unfeasible to mount a challenge in the *626 absence of a class proceediilg. In fact, not all of the actions before us have been brought as class actions. It is very clear that the individual franchisees have been fully able to proceed.

In a case where class proceedings provide the only economical method of presenting a claim, an alternative exists which would protect both the contractual integrity of proper arbitration agreements and the interests of individual claimants. One solution which has been suggested, and which the majority rejects, “would be to hold that arbitration agreements contained in contracts of adhesion may not operate to stay properly maintainable class actions.” (Ante, p. 610.) I agree that as a general rule such a holding would be contrary to the basic arbitration agreement of the parties and to the policy favoring arbitration. There is, however, another alternative. Under settled principles of law, arbitration clauses in adhesion contracts may be declared invalid where they are “beyond the reasonable expectations of an ordinary person ...” (Wheeler v. St. Joseph Hospital (1976) 63 Cal.App.3d 345, 357 [ 133 Cal.Rptr. 775 , 84 A.L.R.3d 343 ]) or bear oppressively on the weaker party. (Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 710 [ 131 Cal.Rptr. 882 , 552 P.2d 1178 ]; Graham v. Scissor-Tail, Inc. (1981) 28 Cal.3d 807, 820 [ 171 Cal.Rptr. 604 , 623 P.2d 165 ].) Thus, where an arbitration clause in an adhesion contract would allow the stronger party to evade responsibility for its acts, such a clause may, under those facts, be found oppressive and the clause invalidated. In instances where an arbitration clause would effectively deny relief to the weaker party in an adhesion contract, relief under settled principles of law would potentially be available. As the majority concludes, there is no such evasion of liability here, and consequently, there is no need for an extraordinary remedy such as the one proposed by the majority.

In summary, the majority, in the absence of any contractual, statutory, or judicial authority or any demonstrated need, has seen fit to invent a procedure which is fundamentally contrary to the purpose of arbitration and to the public policy encouraging arbitration. Potentially, the majority’s holding will effectively render arbitration clauses in all adhesion contracts subject tb class treatment, thus engrafting on an informal, speedy method of dispute resolution which often utilizes nonlegal arbitrators a complex legal procedure which will require close court supervision and frequent intervention antithetical to the essential informal and nonjudicial nature of the arbitration process.

*627 Conclusion

From the foregoing, I conclude that the trial court erred in holding that the Franchise Investment Law claims were not arbitrable in the face of the clear national substantive law to the contrary. I would reverse the trial court judgment to the extent that it denies arbitration of these claims. In addition, I conclude that in the absence of any statutory or contractual agreement to the contrary, the strong policy reasons favoring arbitration as a speedy, informal, and nonjudicial method of dispute resolution militate against the remand of this case to the trial court to permit it to determine whether class arbitration may be an appropriate procedure. I would affirm the trial court’s order referring the individual cases to arbitration, recognizing that consolidation of the individual arbitrations might be proper.

Mosk, J., concurred.