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A federal district court in Washington found that a bar on class-wide proceedings rendered an arbitration agreement substantively unconscionable, which is sufficient to render an agreement unenforceable under Washington law regardless of where there is any procedural unconscionability.
In Riensche v. Cingular Wireless, LLC, No. C06-1325Z, 2006 WL 3827477 (W.D. Wash. Dec. 27, 2006), Riensche brought a putative class action against Cingular, his wireless service provider, claiming that Cingular had collected improper surcharges. Cingular filed a motion to compel arbitration based on an arbitration clause in Riensche's service agreement. In opposing the motion, Riensche argued that the arbitration agreement was unconscionable and therefore unenforceable.
The Court found that the arbitration agreement was not procedurally unconscionable because Riensche had a meaningful choice in entering into the transaction. In support of this finding, the Court noted that the arbitration clause was mentioned early in the service agreement and that the clause began with the word "arbitration" in all capital letters. Despite the absence of procedural unconscionability, the Court proceeded with its unconscionability analysis because under Washington law, substantive unconscionability, standing alone, is sufficient to render an agreement unenforceable.
Riensche cited several aspects of the arbitration agreement in arguing for a finding of substantive unconscionability. The Court found that only two aspects of the agreement warranted a finding of substantive unconscionability.
First, the Court found that a bar on class-wide proceedings rendered the arbitration agreement substantively unconscionable because it might allow Cingular to "cheat large numbers of consumers out of individually small sums of money." Even though the Court was applying Washington law, and even though the absence of procedural unconscionability would be fatal to an unconscionability challenge under California law, the Court cited a California decision to support its conclusion that the bar on class-wide proceedings was substantively unconscionable. However, as the Court acknowledged, the enforceability of a bar on class-wide proceedings is currently pending before the Washington Supreme Court.
The Court also found that a limitation on remedies – specifically, a term disallowing injunctive relief in favor of anyone other than the individual claimant – was substantively unconscionable because it excessively favored Cingular.
Under the terms of the arbitration agreement, the unenforceability of the bar on class-wide proceedings meant that the entire agreement was null and void. Accordingly, instead of severing the offending provisions and ordering arbitration, the Court denied the motion to compel.
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