July 19, 2006
California Appellate Court Rules Arbitration Clause In "Extreme Makeover" Contract Unconscionable
The California Court of Appeal, 2nd Appellate District, has agreed with participants on an episode of the show "Extreme Makeover: Home Edition" that the requirement that they engage in arbitration before broadcast is unconscionable and has granted the participants' request for a writ of mandate.
The Higgins family, consisting of five brothers and sisters, took up residence with the Leomiti family after their parents died. "According to Charles Higgins, after moving in with Leomitis, he was advised by members of his church that producers of Extreme Makeover had contacted the church and had asked to speak to him about the production of a show based on the loss of petitioners' parents and that petitioners were now living with the Leomitis." Eventually, both the Higgins children and the Leomiti family agreed to appear on "Extreme Makeover: Home Edition" and participate in a makeover of the Leomiti family's residence. The Higgins children signed the agreement with the producers of "Extreme Makeover" on Mrs. Leomiti's instructions. "According to Charles...Mrs. Leomiti instructed petitioners to `flip through the pages and sign and initial the document where it contained a signature line or box.' Charles stated that from the time Mrs. Leomiti `handed the document to use and the time we signed it, approximately five to ten minutes passed.' The document contained complex legal terms that he did not understand. He did not know what an arbitration agreement was and did not understand its significance or the legal consequences....On February 16, 2005, representatives from the show appeared and started to reconstruct the Leomitis' home. When the new home was completed, it had nine bedrooms, including one for each of the five petitioners. The existing mortgage was also paid off....
"Petitioners allege that, after the show was first broadcast, the Leomitis informed petitioners that the home was theirs (the Leomitis'), and the Leomitis ultimately forced petitioners to leave. Charles contacted Lock and Key's field producer and asked for help. The producer responded that he could not assist petitioners. Sometime thereafter, the Extreme Makeover episode was rebroadcast....According to the record before us, the complaint includes claims for...intentional and ngeligent misreprepresentation, breach of contract, unfair competition...and false advertising....With respect to the television defendants, the complaint appears to allege that those defendants breached promises to provide petitions with a home, exploited petitioners, and protrayed petitioners in a false light (by rebroadcasting the episode when they knew the episode no longer reflected petitioners' living situation). The television defendants petitioned to compel arbitration....The television defendants maintained that all claims against both them and the Leomitis should be arbitrated. The Leomitis joined in the petition."
The trial court considered the petitioners' argument that the Agreement was "substantively unsconscionable because its terms were so one-sided so as to shock the conscience." It granted the petition for arbitration but told the producers of "Extreme Makeover" to pay the costs of arbitration. The lower court also dismissed the claims against the Leomitis and unfair competition and false advertising claims against the show's producers.
The appellate court considered unconscionability generally as a defense to arbitration provisions in such contracts, noting that under the FAA and under California law they are "valid, irrevocable and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract....One ground is unconscionability...." The court then posed the question: "(1) Does the petition here challenge the enforceability of the Agreement and Release, in toto...? (2)...Is the arbitration provision unconscionable?"
The appellate court found that the trial court determined incorrectly that petitioners were challenging the entire agreement. Instead, the petitioners here were challenging only the arbitration provision. "We begin with whether the parties' agreement was adhesive...In this case, it is undisputed that the lengthy Agreement was drafted by the television defendants. It is a standardized contract...There is no serious doubt that the television defendants had far more bargaining power than petitioners....The remaining question is whether petitions were relegated only to signing or rejecting the Agreement." The court answered this question in the affirmative.
To the questions of procedural and substantive unconscionability, the court similarly answered yes.
The case is Higgins v. Superior Court of Los Angeles County, B187818.
Read the entire ruling here.
July 19, 2006 | Permalink
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