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A Michigan federal court enforced an arbitration agreement in a contract for wireless services; but severed the cost-splitting provision upon its determination that the provision was unconscionable because it called for the customer to pay one-half of the arbitration costs.
In Ozormoor v. T-Mobile USA, Inc., No. 08-11717, 2008 WL 2518549 (E.D. Mich. June 19, 2008), Joseph Ozormoor brought suit against T-Mobile alleging violations of Michigan consumer protection law and bad faith for problems arising from his contract for wireless services. T-Mobile moved to compel arbitration.
The Court rejected Ozormoor's argument that he did not agree to the arbitration agreement incorporated within the parties' contract. The Court found that Ozormoor received a copy of the contract and that the arbitration agreement was conspicuously placed within the contract. His continued use of the service constituted acceptance of the terms of the contract. Moreover, Ozormoor admitted in an earlier pleading that he entered into the agreements with T-Mobile. The Court also rejected Ozormoor's argument that the arbitration agreement was not mutually binding on the parties because T-Mobile was also required to arbitrate disputes with its customers.
However, the Court agreed with Ozormoor that the cost-splitting provisions were unconscionable. Ozormoor had no alternative but to accept the cost-splitting provision along with the rest of the arbitration agreement. Further, the provision called for the customer to pay half the costs of arbitration, an amount which the Court found could prohibit customers such as Ozormoor from pursuing claims. Nevertheless, the Court determined that the cost-splitting provision could be stricken from the arbitration agreement pursuant to severability language in the contract.
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