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An agreement to arbitrate is procedurally unconscionable if it is not bargained for by the consumer, it is not brought to the attention of the consumer, or it is not conspicuous, and that agreement can be held unenforceable on a strong showing of procedural unconscionability alone, according to an Illinois appeals court.
In Bess v. DirecTV, Inc., No. 5-05-0394, 2007 WL 2013613 (Ill. App. Ct. July 10, 2007), Bess filed a complaint against DirecTV, alleging that its imposition of an administrative late fee violated Illinois state law. DirecTV sought to compel arbitration of her claim, maintaining the claim was arbitrable in accordance with its customer service agreement. Bess opposed the motion, alleging, among other grounds, that the agreement to arbitrate was unconscionable, and, therefore, unenforceable. After initial proceedings, and a remand to the trial court that determined the agreement was both substantively and procedurally unconscionable, DirecTV appealed.
The Court agreed with the trial court that the agreement to arbitrate was procedurally unconscionable. The Court found the agreement to be an adhesion contract, since the consumer and the company were in disparate bargaining positions, and the agreement was a form contract offered on a "take-it-or-leave-it basis." While the Court agreed that a "take-it-or-leave-it" contract was not automatically procedurally unconscionable, the Court did consider it to be an important factor. The Court instead held that to avoid a finding of procedural unconscionability, the provision must be bargained for, brought to the attention of the consumer, or be conspicuous.
The Court found the arbitration agreement did not fulfill any of these three requirements. The Court noted that the agreement was a form contract, and not bargained for by Bess, that the arbitration provision was not brought to the attention of the consumer, and that the provision was in a maze of small text, and not conspicuous. The Court was also persuaded by the fact that the agreement to arbitrate was not presented to Bess until after she had agreed to receive DirecTV services, that a "deactivation fee" would be imposed on Bess had she not consented to the arbitration provision at its presentation, and that Bess would likely have been required to bear the cost of equipment already purchased to receive DirecTV services had she declined the provision and cancelled the service.
Given all these circumstances, the Court held that the provision was not only procedurally unconscionable, but that it was procedurally unconscionable to the point that it alone rendered the agreement unenforceable. According to the Court, the circumstances, taken together, "deprived Bess of a meaningful choice in entering into the contract."
The opinion of the Court acknowledged that the trial court found the contract to also be substantively unconscionable, but declined to reach the question because of its disposition on procedural unconscionability.
In a dissenting opinion, one of the judges maintained that, while the agreement may have been procedurally unconscionable to a degree, it was not sufficiently procedurally unconscionable to find the agreement unenforceable on that basis alone. The dissent noted that the practices of DirecTV were common, that such approve-or-return devices were less costly and burdensome and therefore arguably beneficial to consumers, and that there was no evidence that Bess's equipment purchase expenses were not refundable. The dissent also reached the question of substantive unconscionability, finding the trial court's conclusion that Bess would have to bear unreasonable costs in arbitration was in error. The dissent found the clear language of the controlling arbitration rules would have only required Bess to bear a cost of $125 instead of fees in excess of $60,000 as claimed by the trial court; the dissent was unpersuaded that requiring Bess to bear that limited cost rendered the agreement substantively unconscionable.
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