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Finding the use of a bank "signature card" that contained a difficult-to-read arbitration agreement both procedurally and substantively unconscionable, a Federal District Court in California refused to enforce the agreement.
In Geoffroy v. Washington Mutual Bank, No. 06 CV 1732 BEN (WMC), 2007 WL 1334375 (S.D. Cal. May 3, 2007), Geoffroy opened a consumer checking account with Washington Mutual Bank (WAMU), deposited an $80,000 inheritance, and departed for a three-month vacation.
Upon her return, she discovered that the account had been drained by some other person, and overdrawn by $20,000. The bank demanded repayment, Geoffroy sued, and WAMU moved to compel arbitration.
In refusing to enforce the arbitration agreement, the Court noted that by California's "sliding scale" approach to determining unconscionability, finding a high level of either procedural or substantive unconscionability on the one hand proportionally reduced the need to find much evidence of its counterpart on the other.
Noting the difficulty in reading the small font size, the placement of the agreement on a card traditionally used simply to verify signatures, the unequal bargaining power, and the "take it of leave it nature" of the exchange, the Court found a very high degree of procedural unconscionability.
Though noting that by the "sliding scale" standard, the substantive unconscionability "need only be small to render (the) arbitration provision unenforceable," the Court found ample evidence in the cost-splitting terms, the unilateral termination and modification provision, and the lack of mutuality of the agreement.
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