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The California Court of Appeal rejected a credit card holder's unconscionability challenge to an arbitration agreement because the agreement contained an opt-out provision and its terms were conspicuously displayed.
In Columbia Credit Services, Inc v. Billingslea, No. B190776, 2007 WL 1982721 (Cal. Ct. App. July 10, 2007), Billingslea obtained an MBNA credit card in 1997. In 1999, MBNA mailed notices to its cardholders, stating that it was adding a binding arbitration provision to its cardholder agreement. Billingslea did not opt out of the arbitration provision. He continued to use the card for several years, amassing a $17,821.39 balance.
MBNA sold its interest to Hilco Receivables, which later sold its rights to Columbia Credit. Columbia Credit initiated arbitration to collect the unpaid balance. The arbitrator awarded Columbia $31,653.71 for the unpaid balance, interest, and attorney fees.
Columbia moved to confirm the award. Billingslea sought vacatur, claiming that the arbitration agreement was unconscionable and that he did not receive notice of the arbitration claim. The trial court confirmed the award and Billingslea appealed.
On appeal, the Court upheld the arbitration agreement and found that Billingslea received proper notice of the arbitration proceeding. Although Billingslea did not challenge the award until after the statutory deadline had expired, the Court nevertheless addressed the merits of Billingslea's appeal because his challenge involved the validity of the arbitration agreement.
The Court rejected Billingslea's unconscionability challenge, finding the arbitration agreement complied with Delaware law. MBNA mailed the arbitration agreement in a separate document from the contract. Additionally, the arbitration agreement's terms were in capital letters and italicized, underscoring the importance of the information conveyed. Also, the arbitration agreement contained an opt-out provision, which Billingslea did not exercise.
The Court also found the evidence established that Billingslea received proper notice of the arbitration claim. A Columbia Credit employee provided an affidavit, stating it had served Billingslea in accordance with the arbitration rules. Further, Columbia produced a UPS receipt showing Billingslea signed for delivery of the arbitration claim.
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