A Pennsylvania federal district court determined that an arbitration agreement that reserved judicial remedies exclusively for a construction company, but required its customers to submit all disputes to arbitration was unconscionable, and therefore unenforceable.

In DePrizio v. LTS Realty Co., No. 3:CV-05-2273, 2008 WL 169640 (D. Pa. Jan. 16, 2008), DePrizio entered into a contract for the construction of a home with LTS.

The construction contract required DePrizio to submit to arbitration any dispute arising from the home construction. The contract also reserved, exclusively for LTS, the option to litigate any dispute.

Various problems arose delaying the construction of DePrizio's home. DePrizio filed a complaint against LTS. In response, LTS filed a motion to dismiss as the construction contract required DePrizio to submit all claims to arbitration.

DePrizio argued that the arbitration provision is procedurally and substantively unconscionable. The Court first noted that whether an arbitration agreement is unconscionable is ultimately a question of law, but one that requires an inquiry into relevant facts. Further, the Court noted that adhesion contracts are not necessarily unconscionable and unenforceable.

Pennsylvania courts have considered whether an arbitration agreement which exempts certain creditor remedies from arbitration while requiring the submission of other claims to arbitration is unconscionable under Pennsylvania law.

The Court noted that Lytle v. Citifinancial Services, Inc., 810 A.2d 643 (Pa. Super. Ct. 2002), held as a matter of law, an arbitration provision which exempted certain financial institutions remedies from arbitration, while requiring the consumer to arbitrate other claims, was presumptively unconscionable, and therefore, unenforceable.

However, in Salley v. Option One Mortgage Corp., 925 A.2d 115 (Pa. 2007), the Pennsylvania Supreme Court reversed Lytle, concluding that the exception from arbitration for foreclosure does not render the agreement presumptively unenforceable under Pennsylvania law.

The Court determined that the decision in Salley is limited to the facts of Salley. The Court noted that in this case, the result of the construction contract terms do not reserve some judicial remedies ordinarily unique to a lending institution, such as foreclosure. Rather, the terms in the construction contract reserved option for judicial remedies in every instance to LTS alone.