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In denying a motion to compel arbitration, a federal district court in California held that a bar on class-wide proceedings rendered an arbitration agreement unconscionable and therefore unenforceable.
In Winig v. Cingular Wireless LLC, No. C 06 4297 MMC, 2006 WL 2766007 (N.D. Cal. Sep. 27, 2006), Winig brought a class action against Cingular, his wireless phone service provider, alleging that Cingular improperly deducted “anytime minutes” for calls Winig made to check his voice mail.
Cingular moved to compel arbitration pursuant to an arbitration agreement that barred class-wide proceedings. In opposing the motion, Winig argued that the bar on class-wide proceedings rendered the arbitration agreement unconscionable and therefore unenforceable.
Even though Cingular presented evidence that Winig could have obtained wireless phone service from another provider, the Court found that the agreement was procedurally unconscionable because in Ingle v. Circuit City Stores, 328 F.3d 1165 (9th Cir. 2003), the Ninth Circuit adopted the view that “the availability of other options does not bear on whether a contract is procedurally unconscionable.”
Cingular argued against a finding of substantive unconscionability based on a provision in the arbitration agreement requiring Cingular to pay reasonable attorney fees to a consumer who obtains an award equal to or greater than his demand. Unpersuaded, the Court relied on Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) in finding the agreement substantively unconscionable.
Finally, Cingular argued that the Federal Arbitration Act preempted the Court’s application of Discover Bank. Specifically, Cingular argued that the arbitration agreement could be deemed unconscionable “only under an idiosyncratic standard does that does not apply equally to all contractual terms.” In rejecting this argument, the Court relied on Discover Bank for the notion that the invalidation of “unlawfully exculpatory” contracts is “a principle of California law that does not specifically apply to arbitration contracts, but to contracts generally.”
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