Vol. 75, No. 9, September
Mandatory Arbitration of Consumer Rights Cases
The ability of corporations to opt out of the public civil justice
system by using mandatory arbitration clauses in consumer contracts
poses a fundamental policy question for Congress and the courts. Still,
there are ways to preserve clients' rights to have their day in
by Debra L. Schneider & Michael J.
n December 2001 a national long-distance
telephone company mailed a notice to its customers in Wisconsin and
elsewhere across the country telling them that they were losing their
right to sue the company in court for violations of their legal rights.
Instead, the customers would have to submit their legal claims to a
private and binding arbitration system if they wanted to keep their
In addition to losing their right of access to courts, Wisconsin
customers would no longer be able to recover punitive damages or
attorney fees in arbitration with the company even though such relief
would be available to them in court under the Wisconsin Consumer Act.
Furthermore, customers were given only two years to file any claims in
arbitration, despite the existence of longer statutes of limitation, and
were prohibited from participating in any class action against the phone
company. What is perhaps most surprising about these restrictions on
consumers' rights is that they are hardly unique to this particular
Across the country, businesses are effectively privatizing the civil
justice system and rewriting consumer protection laws through their use
of mandatory arbitration. More and more businesses in a growing number
of fields are inserting mandatory and binding arbitration clauses into
their standard form contracts with consumers. This trend poses the
potential to shield businesses from liability to consumers and to
conceal corporate wrongdoing from public scrutiny. Although arbitration
clauses are generally enforceable under federal and state law, they
cannot be enforced if they are imposed in an unfair or deceptive manner
or would prevent consumers from effectively enforcing all of the legal
rights they would have in court.
This article gives a brief overview of some of the problems that
consumers may experience with private arbitration when it is imposed by
businesses through contracts of adhesion. It then outlines some of the
leading arguments that consumer advocates in Wisconsin and elsewhere are
using to fight arbitration and preserve their clients' right of access
Problems with Mandatory Arbitration of Consumer Claims
Private arbitration may serve beneficial purposes when it is used in
commercial agreements between parties of equal bargaining power who have
access to legal representation when the contract is formed, at the time
the contract consists of genuinely bargained-for terms, and when all
parties are clearly aware of its implications. However, when mandatory
and binding arbitration clauses are placed in consumer contracts, the
result can be unfair to consumers. Arbitration requirements are common
in consumer transactions with credit card issuers, telephone service
providers, car dealerships, mobile home manufacturers, and both prime
and subprime lending institutions. The arbitration clauses typically
appear in standard form preprinted contracts of adhesion that businesses
use in consumer transactions.1 Most American
consumers have by now received at least one mandatory arbitration clause
in some form of purchase agreement or billing statement and therefore
have, whether knowingly or not, waived their right of access to court to
resolve many legal disputes.
In addition to experiencing disadvantages in bargaining power,
consumers may not immediately comprehend the implications of an
arbitration clause because they are primarily focused on the purpose and
price of a given transaction. Businesses, on the other hand, enter into
transactions with consumers on a daily basis and thus are far more
likely to be thinking about dispute resolution when they draft a
contract. Consumers may be unaware that arbitration materially changes
the rules of dispute resolution so that the right to a jury trial is
eliminated, pre-hearing discovery is limited, class actions are
prohibited, and the ability to appeal erroneous interpretations of the
law is sharply circumscribed.2 In some
instances, an arbitration clause will require the consumer, but not the
merchant, to arbitrate disputes. Some arbitration clauses even bind
consumers to arbitration not just for disputes arising from the current
transaction but also for disputes arising from past transactions.3 Since many businesses draft arbitration clauses in
legalese and insert them in the fine print of standard form contracts,
consumers are relinquishing important legal protections without ever
giving their meaningful consent.
Private arbitration proceedings themselves can work to the benefit of
corporate defendants for reasons that might make consumers and their
advocates think twice before relinquishing access to court. One
commentator has observed a shared perception among plaintiff advocates
and corporate representatives alike that arbitration "systematically
favors" business defendants over individual plaintiffs.4 A federal court of appeals has found that
arbitration allows businesses, as "repeat players" in the forum, to gain
advantage over individual plaintiffs based on their superior knowledge
in the selection of the arbitrators who will decide their cases.5
A compelling example of one-sided results in a consumer arbitration
system involving a major credit card lender was reported in The
Washington Post: "The data, disclosed ... by First USA in a
class-action lawsuit challenging mandatory arbitration, show that not
only has the company sought arbitration far more often than consumers,
it has also won 99.6 percent of the cases that went all the way to the
Even when plaintiffs prevail over corporate defendants, studies show
that arbitrators tend to award smaller amounts in damages than judges
and juries would award in court.7 This
evidence of advantages for corporate defendants is predictable in a
system in which arbitrators compete to be selected by the parties, work
under short-term contracts, and may fear a loss of future work if their
decisions are seen as unfavorable by the parties that are most likely to
appear in subsequent arbitrations.
Arbitration proceedings also can be exceedingly expensive for
consumers, with case filing fees of several hundred dollars and
arbitrator fees (typically $150 to $450 per hour) running into the
thousands of dollars.8 These costs contrast
sharply with state trial court filing fees of $70 for small claims and
$214 for large claims in most Wisconsin counties.9 Although forum costs are not the only expense that
consumers incur when they pursue claims in court or arbitration, the
added costs of arbitration pose a significant obstacle at the point of
entry in consumer cases. Since many consumers do not pay attorney fees
up front either because of statutory fee-shifting provisions or
contingency fee agreements, the initial costs of the arbitral forum (as
opposed to a judicial forum) are likely to bear significantly on a
consumer's ability to pursue her claims.
A financially strapped consumer who was defrauded by a business may
view the high filing fees and the arbitrator's hourly charges as
insurmountable barriers, especially in light of the value of her
individual claims. The cost of private arbitration thus can prevent
consumers from ever pursuing, let alone vindicating, their statutory and
common law claims against businesses.
Consumers' statutory claims frequently involve small sums of money
compared with those at stake in business disputes under commercial
contracts. In court, consumers can aggregate these claims on a
class-wide basis and obtain representation by attorneys who can afford
to work for a contingency fee based on the aggregate value of the
claims. In arbitration, by contrast, businesses often argue (with a
surprising degree of success) that class-based proceedings are
prohibited so that a consumer can vindicate only her individual
claim.10 The combination of a ban on
aggregated claims and the imposition of substantial forum costs thus may
render private arbitration inaccessible as a forum for many
Arbitration also is typically enshrouded in secrecy, with arbitration
services like the National Arbitration Forum adopting rules that allow
businesses to bar plaintiffs from disclosing information about their
cases.11 Because papers filed with the
arbitrator are not public records and proceedings do not take place in
public courtrooms, businesses are better able to evade accountability by
shielding allegations of their own wrongdoing from public scrutiny. If
Bridgestone and Ford dealers had adopted arbitration provisions several
years ago, they might well have succeeded in concealing their tire
failures from the press and the public. The dangers posed by this
secrecy are compounded by the nearly unbridled discretion that
arbitrators have in deciding cases. Courts have repeatedly held that
arbitration decisions are subject to the most limited judicial review,
with the U.S. Supreme Court recently finding that "improvident, even
silly fact finding" is not grounds for overturning an arbitrator's
In light of these disadvantages of private arbitration proceedings,
consumers often will seek to assert and preserve their right of access
to court in response to a business defendant's motion to compel
Fighting Mandatory Arbitration
The Federal Arbitration Act. Most contractual
arbitration clauses are governed by the Federal Arbitration Act
(FAA).13 The U.S. Supreme Court has
interpreted the FAA to create a rule of substantive contract law making
arbitration agreements enforceable on the same footing as other
contracts.14 As substantive federal law,
the FAA applies in both federal and state courts.15 State courts frequently are called upon to apply
the FAA because the Act, despite its declaration of substantive federal
law, "does not create any independent federal-question jurisdiction
under 28 U.S.C. § 1331 or otherwise."16 Although the Supreme Court has stated that
the FAA establishes a liberal federal policy favoring
arbitration,17 this policy does not require
courts to enforce arbitration clauses that unfairly burden the rights of
Section 2 of the FAA provides that arbitration agreements shall be
enforceable "save upon such grounds as exist at law or in equity for the
revocation of any contract."18 The Supreme
Court has held that the FAA preempts state laws singling out arbitration
clauses from other contractual provisions for nonenforcement or
disfavored treatment.19 Based on these
holdings, the Wisconsin Court of Appeals and several federal courts have
held that the FAA preempts the provision of Wisconsin's Fair Dealership
Law that requires judicial resolution of disputes relating to franchise
dealership agreements, because it singles out and disfavors arbitration
At the same time, however, the Supreme Court has recognized that
"generally applicable contract defenses, such as duress, fraud, or
unconscionability, may be applied to invalidate arbitration agreements
without contravening § 2."21 The key
to making a successful challenge against arbitration in a given case is
thus to attack the unfair aspects of the particular arbitration clause
at issue and not to make generalized arguments against all arbitration.
These arguments will necessarily be fact-specific and may require
developing an extensive factual record on contract formation and the
effects of a contract's terms, but the FAA expressly provides for trial
proceedings in advance of a court's determination that a case should be
ordered into arbitration.22
State Law Grounds for Resisting Arbitration. The FAA
does not by itself answer the question of whether an arbitration clause
is enforceable. Instead, the Act requires application of state contract
law to the critical questions of whether the parties formed an agreement
to arbitrate and whether the particular agreement can be enforced under
generally applicable contract law rules.
Formation of Agreement to Arbitrate. Arbitration is a matter
of contract, and a party is not required to submit any dispute to
arbitration unless the party has agreed to do so.23 Arbitrators derive their authority solely from
the parties' advance agreement that they will submit their disputes to
arbitration.24 A party seeking to compel
arbitration bears the burden of showing that the other party has agreed
to arbitrate in the first instance and waived the right to go to
trial.25 The question of "substantive
arbitrability," in other words, whether the parties have agreed to
submit a matter to arbitration, is a question of law for the court to
In general, an individual does not waive a constitutional right, such
as the right to a jury trial, unless that waiver is knowing, voluntary,
and intelligent.27 The Wisconsin Consumer
Act (WCA) provides additional support for this proposition in the
context of consumer transactions. The WCA is remedial legislation
intended to protect consumers from "unfair, deceptive, false, misleading
and unconscionable practices by merchants"28 and "to permit and encourage the development of
fair and economically sound consumer practices in consumer
transactions."29 The legislature "clearly
intended the Wisconsin Consumer Act to assist consumers, particularly
those of limited means, in combating unfair business practices."30 Thus, when evaluating whether or not an
agreement to arbitrate has been formed, courts must determine whether
the consumer expressly agreed to arbitrate, whether that agreement was
made knowingly and voluntarily, and whether the language of the
arbitration clause is clear and unambiguous in communicating to the
consumer the nature and significance of what is being signed.31
In situations in which a consumer never signed an agreement to
arbitrate, in which the consumer's claim arose prior to the date of the
contract, and perhaps in which the merchant unilaterally attempted to
impose an arbitration clause after the parties already had reached an
agreement, consumers may argue under state contract law that an
agreement to arbitrate was never formed. For example, a federal district
court recently held that there was no agreement to arbitrate in an
online consumer transaction in which the customer was able to download
the software program he was purchasing without ever seeing or clicking
on the Web site's arbitration clause to signify his assent to it.32 Only if the court finds that there is in fact an
agreement between the parties to arbitrate can it go on to analyze
whether the contract is enforceable.
State Contract Law. Some arbitration clauses are vulnerable
to challenge under the state law doctrine that courts will not enforce
contract provisions that are unconscionable. To establish that a
contract provision is unconscionable, a party typically has to show that
there is a substantial imbalance in bargaining power between the
contracting parties, that one party had no meaningful choice as to a
provision, or that the provision was hidden or concealed from the party
(so-called "procedural unconscionability"), while at the same time
showing that the provision itself is unfairly one-sided in favor of the
stronger party (so-called "substantive unconscionability").33
Procedural unconscionability addresses those factors bearing upon the
meeting of the minds of the contracting parties, such as "age,
education, intelligence, business acumen and experience, relative
bargaining power, who drafted the contract, whether the terms were
explained to the weaker party, whether alterations in the printed terms
were possible, [and] whether there were alternative sources of supply
for the goods in question."34 Substantive
unconscionability "embraces the contractual terms themselves, and
requires a determination whether they are commercially
The Wisconsin Consumer Act also enumerates specific factors that are
to be considered in determining whether a consumer transaction is
procedurally or substantively unconscionable.36 These factors include whether "the terms of the
transaction require customers to waive legal rights"37 or to "jeopardize money or property beyond the
money or property immediately at issue in the transaction."38 Specific business practices that may take
advantage of a consumer's inability to protect her interests39 or that have the natural effect of causing a
consumer to misunderstand the nature of the transaction also are to be
considered as indicia of unconscionability.40
Consumers may be able to establish the procedural element of
unconscionability by demonstrating that they have no meaningful choice
as to arbitration when the business defendant is part of an industry in
which consumer arbitration requirements are prevalent. In a case
involving subprime lending practices, for example, one state's high
court held that the plaintiff borrowers had established procedural
unconscionability by building a record showing that nearly every
regional subprime lender, including the defendant, required borrowers to
submit to arbitration as a condition for taking out a loan.41 The resulting absence of borrower choice as to
arbitration made the lender's arbitration requirement procedurally
While arbitration clauses are not per se unconscionable, some
companies write them in such a one-sided manner that their terms become
substantively unconscionable when applied against consumers. For
example, several courts, including the Seventh Circuit, have held that a
business's arbitration clause is either unconscionable or void for want
of mutuality or consideration when it requires consumers or employees to
submit to arbitration while preserving the exclusive right of the
business to sue in court on its own claims.42 Courts also have held that arbitration clauses
are substantively unconscionable if they contain provisions restricting
the arbitrator's authority to award relief that otherwise would be
available to prevailing parties in court.43
Thus, while the FAA makes arbitration clauses enforceable as a general
matter, federal law does not displace the important role of state law in
preventing businesses from using adhesion contracts to take unfair
advantage of consumers.
Consumers also may use the high costs of arbitration to argue that a
defendant's arbitration clause is unconscionable.44 This argument requires developing an evidentiary
record by the party challenging arbitration in order to support the
claim that arbitration is too expensive and that the costs involved
would deter many consumers from attempting to vindicate their
In addition to the doctrine of unconscionability, the entire range of
contract law rules and requirements is available to consumers fighting
arbitration. The common law and U.C.C. doctrines of fraud, duress,
incapacity, undue influence, mistake, and breach of good faith may
enable a party to resist enforcement of an arbitration clause. For
example, the U.S. Supreme Court recently held that an arbitration
agreement between an employer and an employee did not prevent the Equal
Employment Opportunity Commission (EEOC) from suing the employer in
court to obtain victim-specific relief for the employee because the EEOC
was not a party to the arbitration clause.46 In so holding, the Supreme Court explained that
"we do not override the clear intent of the parties, or reach a result
inconsistent with the plain text of the contract, simply because the
federal policy favoring arbitration is implicated."47 Other appellate courts have similarly relied on
ordinary contract law principles to limit the scope of arbitration
clauses by holding, for example, that an agreement between a mobile home
manufacturer and a home buyer does not bind the buyer's nonsignatory
children who were injured by a manufacturing defect, and that a credit
card lender's contract allowing consumers to "request" arbitration does
not create a binding requirement.48
Since the FAA explicitly preserves state contract law arguments
against the enforcement of arbitration clauses, these arguments can
serve as a powerful tool for preserving the rights of consumers,
including their right of access to court.
Federal Law Grounds for Resisting Arbitration.
Finally, parties also may succeed in beating arbitration in some
settings by raising arguments under federal law. The U.S. Supreme Court
has conditioned its approval of binding arbitration for federal
statutory claims on the requirement that arbitration provide all
substantive rights and remedies that would be available to parties in
court: "By agreeing to arbitrate a statutory claim, a party does not
forgo the substantive rights afforded by the statute; it only submits to
their resolution in an arbitral, rather than a judicial, forum."49 Therefore, arbitration must allow a claimant to
"effectively vindicate his or her statutory cause of action,"50 and must offer "all of the types of relief that
would otherwise be available in court" before a court may require
arbitration of any statutory claims.51
Conversely, courts will not enforce arbitration contracts that
diminish a claimant's statutory rights.52
The Seventh Circuit recently held that an employer's mandatory
arbitration clause was unenforceable against a former employee asserting
Title VII sex discrimination claims because the clause required each
party to pay its own attorney fees, thereby denying a prevailing
plaintiff her statutory right to recover attorney fees.53 In so holding, the Seventh Circuit explained
"[T]he clause here purports to forfeit McCaskill's statutory right to
attorney's fees, a remedy that we have already recognized is essential
to fulfill the remedial and deterrent functions of Title VII. Because
the provision prevents her from effectively vindicating her rights in
the arbitral forum by preemptively denying her remedies authorized by
Title VII, the arbitration agreement is unenforceable."54
Thus, when a business overreaches by writing an arbitration clause
that limits the substantive remedies that otherwise are available to
consumers under federal or state law, a consumer may argue that federal
law prohibits enforcement of the arbitration clause.
Consumers also may argue that the federal statutes giving rise to
their claims prohibit all mandatory binding arbitration requirements
imposed by businesses. While the Supreme Court has held that claims
under many federal statutes are subject to arbitration,55 the Court also has repeatedly recognized that
Congress is free to override the FAA's policies in any other statute by
prohibiting arbitration of claims.56
Consumers have had considerable success, for example, in arguing that
the federal Magnuson-Moss Warranty Act 57
prohibits binding arbitration of breach of express warranty claims
through its provisions requiring that any informal dispute resolution
proceedings established by warrantors be nonbinding.58 Consumer advocates should thoroughly examine a
federal statute's text, legislative history, and underlying purposes
before conceding that claims arising under the statute are subject to
arbitration under the FAA.
L. Schneider, Marquette 1984, is a sole practitioner doing
business as Consumer Legal Advocacy, Waukesha, representing the
interests of individual consumers.
J. Quirk is the NAPIL Consumer Rights Fellow with Trial Lawyers
for Public Justice (TLPJ) in Washington, D.C., where he works on TLPJ's
Mandatory Arbitration Abuse Prevention Project. He is coauthor of the
book Consumer Arbitration Agreements: Enforceability and Other Topics
(National Consumer Law Center and The TLPJ Foundation, 2001), published
as part of NCLC's Consumer Credit and Sales Legal Practice Series.
Lisa A. Petersen, Northern Illinois 1993, practices
with Ticor & Chicago Title Insurance Companies in Waukesha.
The ability of corporations to opt out of the public civil justice
system poses fundamental policy questions for Congress and for the
courts. In seeking to preserve their clients' right to have their day in
court, consumer advocates can fight the enforcement of arbitration
clauses in many cases by drawing from a wide range of arguments that are
available to them under state and federal law.
1 An adhesion
contract is one in which a party has no realistic opportunity to bargain
over the contract's terms and, therefore, has little choice but to
accept those terms as a condition of entering into the transaction.
See, e.g., Katze v. Randoph & Scott Mut. Fire Ins. Co., 116
Wis. 2d 206, 212-13, 341 N.W.2d 689, 692 (1984).
2 For a discussion
of the procedural differences between judicial and arbitration
proceedings, see Armendariz v. Foundation Health Psychare
Servs., 6 P.3d 669, 692-93 (Cal. 2000).
3 See, e.g.,
Zawikowski v. Beneficial Nat'l Bank, 1999 U.S. Dist. Lexis 514
(N.D. Ill. Jan. 11, 1999).
4 David S.
Schwartz, Enforcing Small Print to Protect Big Business: Employee
and Consumer Rights Claims in an Age of Compelled Arbitration, 1997
Wis. L. Rev. 33, 63-64.
Lisa B. Bingham, Employment Arbitration: The Repeat Player
Effect, 1 Employee Rights & Employment Pol'y 189 (1997);
see also Cole v. Burns Int'l Sec. Servs., 105 F.3d
1465, 1476 (D.C. Cir. 1997); Mercuro v. Superior Court, 116
Cal. Rptr. 2d 671, 679 (Ct. App. 2002).
6 Caroline E.
Mayer, Win Some, Lose Rarely? Arbitration Forum's Rulings Called
One-Sided, Wash. Post, Mar. 1, 2000.
Marcus Nieto and Margaret Hosel, Arbitration in California Managed
Health Care System, 21 (2000) (study commissioned by California
Legislative Research Service); see
also Armendariz, 6 P.3d at 693 (citing Haig,
Corporate Counsel's Guide: Development Report on Cost-Effective
Management of Corporate Litigation, 610 PLI/Lit. 177, 186-87 (July
1999), and Schwartz, supra note 4, at 64-65).
8 See Ting v.
AT&T, 182 F. Supp. 2d 902, 917 (N.D. Cal. 2002).
9 Wis. Stat.
§§ 814.62(3)(a), .61(1)(a), .634, .635.
e.g., Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir. 1995)
(holding that party cannot assert class claim in arbitration unless
arbitration clause specifically allows aggregation of claims).
National Arbitration Forum, Code of Procedure Rule 4 ("Confidentiality")
("Arbitration proceedings are confidential unless all parties agree
otherwise. A party who improperly discloses confidential
information shall be subject to sanctions. The Arbitrator, Director, and
Forum staff shall not disclose confidential information. Parties may
disclose Orders and Awards they receive"). (Emphasis added.)
League Baseball Players Ass'n v. Garvey, 532 U.S. 504, 509 (2001)
(citation omitted); see also, generally, Lattimer-Stevens Co. v.
United Steelworkers, 913 F.2d 1166, 1169 (6th Cir. 1990) ("When
courts are called on to review an arbitrator's decision, the review is
very narrow; one of the narrowest standards of judicial review in all of
13 9 U.S.C.
§§ 1 et seq.
e.g., Southland Corp. v. Keating, 465 U.S. 1, 11 (1984); Volt
Information Sciences Inc. v. Board of Trustees of Leland Stanford Jr.
Univ., 489 U.S. 468, 478 (1989).
Keating, 465 U.S. at 16; see also Madison Beauty Supply
Ltd. v. Helene Curtis Inc., 167 Wis. 2d 237, 481 N.W. 2d 644 (Ct.
Keating, 465 U.S. at 15 n.9.
17 Moses H.
Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
18 9 U.S.C.
Keating, 465 U.S. at 3; Perry v. Thomas, 482 U.S. 483, 491
(1987); Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265, 281
(1995); Doctor's Assocs. Inc. v. Casarotto, 517 U.S. 681, 687,
Madison Beauty Supply Ltd. v. Helene Curtis Inc., 167 Wis. 2d 237,
481 N.W.2d 644 (Ct. App. 1992); S+L+H S.p.A. v. Miller-St. Nazianz
Inc., 988 F.2d 1518 (7th Cir. 1993); Good(E) Business Sys. Inc.
v. Raytheon Co., 614 F. Supp. 428 (W.D. Wis. 1985).
Casarotto, 517 U.S. at 686-87; see also Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 33 (1991) ("courts
should remain attuned to well-supported claims that the [arbitration]
agreement resulted from the sort of fraud or overwhelming economic power
that would provide grounds for the revocation of any contract") (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473
U.S. 614, 627 (1985)).
9 U.S.C. § 4.
Joint Sch. Dist. No. 10 v. Jefferson Educ. Ass'n, 78 Wis. 2d 94,
101, 253 N.W.2d 536, 540 (1977); Kimberly Area Sch. Dist. v.
Zdanovec, 222 Wis. 2d 27, 38-39, 586 N.W.2d 41, 46 (Ct. App.
Zdanovec, 222 Wis. 2d at 39, 586 N.W.2d at 46.
25 Gibson v.
Neighborhood Health Clinics Inc., 121 F.3d 1126, 1130 (7th Cir.
1997) (applying Indiana law).
Joint Sch. Dist. No. 10, 78 Wis. 2d at 101-102, 253 N.W.2d at
540-41; Zdanovec, 222 Wis. 2d at 38, 586 N.W.2d at 46.
Co. v. Irving Trust Co., 757 F.2d 752, 756 (6th Cir. 1985) ("Those
cases in which the validity of a contractual waiver of jury has been in
issue have overwhelmingly applied the knowing and voluntary
28 Wis. Stat.
29 Wis. Stat.
30 Kett v.
Community Credit Plan Inc., 228 Wis. 2d 1, 18, 596 N.W.2d 786
31 For a
discussion on conspicuousness in exculpatory contracts, see Yauger
v. Skiing Enters. Inc, 206 Wis. 2d 76, 86-89, 557 N.W.2d 60
Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585
Fed. Finan. Serv. Inc. v Derrington Chevron Inc., 230 Wis. 2d 553,
558, 602 N.W.2d 144, 146-47 (Ct. App. 1999); Discount Fabric House
Inc. v. Wisconsin Tel. Co., 117 Wis. 2d 587, 602, 345 N.W.2d 417,
Derrington, 230 Wis. 2d at 559, 602 N.W.2d at 147; Discount
Fabric House, 117 Wis. 2d at 602, 345 N.W.2d at 425.
Derrington, 230 Wis. 2d at 559, 602 N.W.2d at 147; Discount
Fabric House, 117 Wis. 2d at 602, 345 N.W.2d at 425.
36 Wis. Stat.
37 Wis. Stat.
38 Wis. Stat.
39 Wis. Stat.
40 Wis. Stat.
Gen. Fin. Inc. v. Branch, 793 So. 2d 738, 750-51 (Ala. 2000),
cert. denied, 122 S. Ct. 342 (2001); see also Ting,
182 F. Supp. 2d at 929 (finding procedural unconscionability based on
oppression or lack of consumer choice where more than two-thirds of long
distance telephone companies required consumers to arbitrate as
condition of service).
e.g., Gibson v. Neighborhood Health Clinics Inc., 121
F.3d 1126 (7th Cir. 1997) (applying Indiana contract law); Circuit
City Stores Inc. v. Adams, 279 F.3d 889 (9th Cir. 2002) (California
law); Ticknor v. Choice Hotels Inc., 265 F.3d 931 (9th Cir.
2001) (Montana law); Showmethemoney Check Cashers Inc. v.
Williams, 27 S.W.3d 361 (Ark. 2000); Armendariz v. Foundation
Health Psychare Servs. Inc., 6 P.3d 669 (Cal. 2000); Worldwide
Ins. Group v. Klopp, 603 A.2d 788 (Del. 1992) (one-sided
arbitration appeal provision); Iwen v. U.S. West Direct, 977
P.2d 989 (Mont. 1999); Arnold v. United Companies Lending
Corp., 511 S.E.2d 854 (W. Va. 1998). Other courts, applying the
contract law of different states, have rejected this argument. See,
e.g., Harris v. Green Tree Fin. Corp., 183 F.3d 173 (3d Cir. 1999)
(Pennsylvania law); Munoz v. Green Tree Fin. Corp., 542 S.E.2d
360 (S.C. 2001).
e.g., Branch, 793 So. 2d at 749-50 (cap on punitive damages that
arbitrator can award is substantively unconscionable); Pinedo v.
Premium Tobacco Inc., 102 Cal. Rptr. 2d 435 (2000) (arbitration
clause is unconscionable based in part on limitations of employees'
statutory remedies); Powertel Inc. v. Bexley, 743 So. 2d 570
(Fla. Dist. Ct. App. 1999); Lozada v. Dale Baker Oldsmobile
Inc., 91 F. Supp. 2d 1087 (W.D. Mich. 2000) (arbitration clause
restricting consumers' statutory right to injunctive relief is
unconscionable); see also Ting, 182 F. Supp. 2d at 930
(prohibition of any relief in arbitration for consumers other than lost
value of telephone service is substantively unconscionable).
e.g., Pitchford v. Oakwood Mobile Homes Inc., 124 F. Supp. 2d 958
(W.D. Va. 2000) (arbitration fees of several thousand dollars borne by
consumer render arbitration clause unconscionable); Pinedo v.
Premium Tobacco Inc., 102 Cal. Rptr. 2d 435 (2000) (requirement
that employee front all arbitration fees cited as factor in finding that
employer's arbitration clause is unconscionable); Brower v. Gateway
2000, 676 N.Y.S.2d 569 (App. Div. 1998) ($4,000 in arbitration
fees, half of which would not be refunded if consumer plaintiff
prevailed, renders arbitration clause unconscionable).
45 Cf. Green
Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 92 (2000) (party
alleging that arbitration costs will prevent her from enforcing her
federal statutory claims bears burden of proof in establishing
likelihood of such prohibitive costs).
46 EEOC v.
Waffle House Inc., 534 U.S. 279, 122 S. Ct. 754, 764 (2002).
Fleetwood Enters. Inc. v. Gaskamp, __ F.3d __, 2002 WL 100434 (5th
Cir. Jan. 24, 2002); Wells v. Chevy Chase Bank, 768 A.2d 620
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473
U.S. 614, 628 (1985).
Gilmer, 500 U.S. at 28.
Cole, 105 F.3d at 1482.
e.g., Perez v. Globe Airport Sec. Servs., 253 F.3d
1280, 1286-87 (11th Cir. 2001) (holding arbitration clause that prevents
prevailing Title VII plaintiff from recovering attorney fees to be
unenforceable); DeGaetano v. Smith Barney Inc., 983 F. Supp.
459, 469 (S.D.N.Y. 1997) (voiding arbitration clause disallowing
attorney fees for prevailing Title VII plaintiff); Lozada v. Dale
Baker Oldsmobile Inc., 91 F. Supp. 2d 1087, 1105 (W.D. Mich. 2000)
(finding as to consumer Truth In Lending Act and state consumer
protection act claims that "both federal and Michigan case law support a
conclusion that an arbitration provision is substantively unconscionable
because it waives class remedies, as well as declaratory and injunctive
relief"); Derrickson v. Circuit City Stores Inc., 81 Fair Empl.
Prac. Cas. 1533 (D. Md. 1999) (arbitration clause capping punitive
damages and back pay remedies under section 1981 is unenforceable),
aff'd, 203 F.3d 821 (4th Cir.) (table), cert. denied,
530 U.S. 1276 (2000).
v. SCI Management Corp., 285 F.3d 623 (7th Cir. 2002).
e.g., Green Tree Fin. Corp.-Ala., 531 U.S. at 92 (Truth In Lending
Act claims generally subject to arbitration); Gilmer, 500 U.S.
at 35 (Age Discrimination in Employment Act claims); Rodriguez de
Quijas v. Shearson/American Express Inc., 490 U.S. 477, 483 (1989)
(Securities Act of 1933 claims).
e.g., Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226
(1987) ("Like any other statutory directive, the Arbitration Act's
mandate may be overridden by a contrary congressional command.").
57 15 U.S.C.
e.g., Wilson v. Waverlee Homes Inc., 954 F. Supp. 1530,
1538 (M.D. Ala. 1997), aff'd mem., 127 F.3d 40 (11th Cir.
1997); Pitchford v. Oakwood Mobile Homes Inc., 124 F. Supp. 2d
958, 964-65 (W.D. Va. 2000); Parkerson v. Smith, ___So. 2d___,
2002 WL 358678 (Miss. March 7, 2002); see also Cunningham v.
Fleetwood Homes of Ga. Inc., 253 F.3d 611, 622-23 (11th Cir. 2001)
and Ex Parte Thicklin, __ So. 2d __, 2002 WL 27925 (Ala. Jan.
11, 2002) (Magnuson-Moss Act's disclosure requirements prohibit
enforcement of warrantor's mandatory arbitration clause that is in
separate document from the written warranty); but see
also In re American Homestar of Lancaster Inc., 50
S.W.3d 480, 486 (Tex. 2001) (holding that warrantor's mandatory binding
arbitration clause is enforceable for consumer claims arising under