Thursday, August 10, 2006
In a relatively recent case, a California appellate court refused to enforce an arbitration clause on unconscionability grounds.
Five orphaned siblings ("petitioners") who appeared in an episode of the television program "Extreme Makeover: Home Edition" challenged an order compelling them to arbitrate most of their claims against various entities involved with the production and broadcast of the program ("television defendants"). The California court held that the parties' agreement was adhesive and that the arbitration clause was procedurally unconscionable because:
[it] appears in one paragraph near the end of a lengthy, single-spaced document. The entire agreement was drafted by the television defendants, who transmitted copies of it to the petitioners. The television defendants knew petitioners were young and unsophisticated, and had recently lost both parents. Indeed, it was petitioners' vulnerability that made them so attractive to the television defendants. The latter made no effort to highlight the presence of the arbitration provision in the Agreement. It was one of 12 numbered paragraphs in a section entitled "miscellaneous." In contrast to several other paragraphs, no text in the arbitration provision is highlighted. No words are printed in bold letters or larger font; nor are they capitalized. Although petitioners were required to place their initials in boxes adjacent to six other paragraphs, no box appeared next to the arbitration provision. It is true that the top of the first page advises petitioners to read the entire agreement before signing it and the second-to-last paragraph states that the person signing acknowledges doing so. This language, although relevant to our inquiry, does not defeat the otherwise strong showing of procedural unconscionability.
The court held that the provision was also substantively unconscionable because of its "harsh, one-sided nature" -- the television defendants (though not the petitioners) could compel arbitration without fearing that doing so would preclude the television defendants' right to injunctive or other equitable relief in court. Additionally, only the petitioners (and not the television defendants) waived the right to appellate review of an arbitration.
Higgins v. Superior Court, 140 Cal.App.4th 1238 (Cal. App. 2d Dist 2006).
[Meredith R. Miller]