A North Carolina state appellate court has remanded an order that granted a motion to compel arbitration but refused to grant a class action injunction, holding that a recent change in unconscionability analysis under North Carolina law required additional fact finding.

In Kucan v. Advance Am., Nos. COA06-447, COA06-505, COA06-506, 2008 WL 2201662 (N.C. Ct. App. May 6, 2008), Kucan and other consumers brought statutory claims against Advance and other consumer loan companies. As part of the transactions, the consumers and the loan companies executed arbitration agreements and class action waivers. The trial court held that the arbitration agreements were enforceable, but declined to enforce the class action waiver.

The Court noted that the trial court applied a test for unconscionability that was recently reformulated by the North Carolina Supreme Court in Tillman v. Commercial Credit Loans, Inc., 629 S.E.2d 865 (N.C. 2008). The new procedural unconscionability in test in Tillman examined the time and notice afforded to the consumer party, the negotiability of the arbitration term, and the disparate bargaining power of the parties. The new substantive unconscionability test considered the cost burden to the consumer, the mutuality of the agreement, and prohibitions on joinder and class actions within the agreement.

Because the trial court’s findings of fact did not consider all the factors deemed material to the unconscionability analysis under Tillman, the Court remanded the matter for additional fact finding.