On August 16, 2001, the California Court of Appeals unequivocally held that commercial contracts are subject to the same unconscionability analysis as other contracts. In light of that holding, the court examined a class action waiver in a commercial contract for unconscionability.

In applying the doctrine of unconscionability to commercial contracts, the appellate court in Walnut Producers of California v. Diamond Foods, Inc. stated that the deference afforded to commercial contracts arose from the facts surrounding the making of the contract and not from their character as a commercial contract. In practice, commercial contracts are subject to the same standard for determining unconscionability as all other contracts.

The present case involved a walnut producing Co-op that entered into an agreement with Diamond Foods in which the Co-op members agreed to supply Diamond Foods with walnuts. The agreement included a dispute resolution provision that required all disputes to be resolved by binding arbitration and precluded the use of class actions. The Co-op later attempted to bring a class action against Diamond for failure to pay Co-op members a reasonable price for their walnuts and argued that the class action waiver in the agreement was unconscionable.

The court concluded that the specific class action waiver in this case was enforceable. Among the things that it examined were whether the plaintiffs were surprised by the waiver, whether the plaintiffs had other business alternatives available, whether the agreement was so one-sided as to shock the conscience, and whether the class action waiver effectively operated as an exculpatory contract. Because the plaintiffs' claims were sufficiently large to seek individual legal remedies, the class action waiver was not an exculpatory clause. Further, the Court did not find that the waiver was unconscionable under any other theory.