|
A federal court in Illinois held that where a wireless provider fails to make the terms of a service contract reasonably available to the consumer, either in paper or online, the contract is so procedurally unconscionable as to render the agreement invalid without consideration of the contract's substantive unconscionability.
In Trujillo v. Apple Computer, Inc., No. 07 C 4946, 2008 WL 4368937 (N.D. Ill. Sept. 22, 2008), Jose Trujillo bought an iPhone from an Apple retail store and gave the phone to Dawn Trujillo as a gift. AT&T is the exclusive provider of wireless service for the iPhone, and it requires a two-year service contract for the iPhone. However, the iPhone battery may not last two years because it must be replaced after about 300 charges, which requires the owner to send the device to Apple, incurring a $79 service fee plus other charges and fees. Consequently, Jose sued both Apple and AT&T (collectively, AATT) for fraud and various breach of contract claims based solely on this iPhone purchase.
AATT moved to compel arbitration based upon its service contract with Jose, which contained a binding arbitration agreement. Jose opposed, arguing that the service contract was unavailable to him both before and during his purchase of the iPhone.
AATT first contended, through a sworn affidavit by in-house counsel "based on personal knowledge," that the service contract was available to Jose both at the Apple store and online. However, when pressed on the issue, AATT eventually admitted that its in-house counsel had no idea if the service contract was available to Jose at the Apple store, and, in fact, the service contract was not available at the store.
Furthermore, AATT admitted that if Jose had searched online for its terms of service, he would not have found the version of those terms upon which AATT premised its motion to compel arbitration. In fact, Jose would have had to use the "search" tool on AATT's website and typed in the appropriate query to find the terms of service, and even then Jose would have found terms of service that were already obsolete. Consequently, the Court held that Jose did not enter into an arbitration agreement with AATT when he purchased an iPhone and gave it to Dawn.
However, a short time after Jose had bought Dawn an iPhone, Dawn bought Jose an iPhone, as well. Jose had to activate the iPhone and service plan online, and when he did so, he agreed to a service contract with AATT that contained an arbitration agreement. AATT contended that this second iPhone service contract and arbitration agreement thus bound Jose to arbitrate his claims regarding his purchase of the first iPhone because it governed "any dispute" between AATT and Jose. Jose did not argue that this "second" service contract did not apply to his purchase of the first iPhone that he gave to Dawn; rather, Jose argued that the contract was unconscionable.
The Court agreed with him and held that the second, possibly-valid contract was still unconscionable when applied to his purchase of the iPhone for Dawn because the contract was still completely unavailable to Jose before or during his purchase of the iPhone. The Court held that under Illinois law, the unavailability of an agreement to a consumer before purchase is a critical factor in determining the issue of procedural unconscionability. By the time Jose first saw or had access to the contract, he had already purchased the iPhone and given it to Dawn, and Jose would have incurred a fee of at least ten percent of the purchase price if he had then returned it. Additionally, the Court noted that Jose would have never had access to the contract if Dawn had not bought a second iPhone for Jose's use.
Consequently, the Court held that the arbitration agreement that Jose actually did see and agree to was still procedurally unconscionable because it was completely unavailable to him before or during his purchase of the iPhone for Dawn. Moreover, the degree of procedural unconscionability "concerns such a basic matter – the unavailability of the agreement to the consumer at the relevant time – that it is enough . . . to render the agreement unenforceable [without regard to the contract's substantive unconscionability]."
Thus, the Court denied AATT's motion to compel arbitration. The Court reprimanded AATT's counsel for producing an affidavit supposedly based upon the personal knowledge of its own in-house attorney that was completely false, and mentioned that it would consider sanctioning AATT for such behavior. In summarizing its rejection of AATT's arguments, the Court held that it "has a hard time believing that the theoretical availability, under a proverbial rock, of an obsolete version of an agreement not actually shown to the consumer can render it enforceable as a matter of Illinois law – and in fact no case . . . so holds."
Subscribe to a free weekly update on ADR case law and
legislation
|