Title: Wisconsin Auto Title Loans, Inc. v. Kenneth M. Jones

State: wisconsin

Issuer: Wisconsin Supreme Court

Document:

2006 WI 53 
 
SUPREME COURT OF WISCONSIN 
 
 
 
 
 
CASE NO.: 
2003AP2457 
 
 
COMPLETE TITLE: 
 
 
Wisconsin Auto Title Loans, Inc., 
          Plaintiff-Appellant-Petitioner, 
     v. 
Kenneth M. Jones, 
          Defendant-Respondent. 
 
 
 
 
REVIEW OF A DECISION OF THE COURT OF APPEALS 
2005 WI App 86 
Reported at: 280 Wis. 2d 823, 696 N.W.2d 214 
(Ct. App. 2005-Published) 
 
 
OPINION FILED: 
May 25, 2006   
SUBMITTED ON BRIEFS: 
        
ORAL ARGUMENT: 
February 21, 2006   
 
 
SOURCE OF APPEAL: 
 
 
COURT: 
Circuit   
 
COUNTY: 
Milwaukee   
 
JUDGE: 
Michael Guolee 
 
 
 
JUSTICES: 
 
 
CONCURRED: 
BUTLER, JR., J., concurs (opinion filed). 
CROOKS, J., joins the concurrence.   
 
DISSENTED: 
ROGGENSACK, J., dissents (opinion filed). 
WILCOX, J., joins the dissent.   
 
NOT PARTICIPATING:         
 
 
 
ATTORNEYS: 
 
For the plaintiff-appellant-petitioner there were briefs by 
Kenneth R. Nowakowski, Lisa M. Arent, and Whyte Hirschboeck 
Dudek 
S.C., 
Milwaukee, 
and 
oral 
argument 
by 
Kenneth 
R. 
Nowakowski. 
 
For the defendant-respondent there was a brief by Peter M. 
Koneazny and Legal Aid Society of Milwaukee, Inc., and oral 
argument by Peter M. Koneazny. 
 
An amicus curiae brief was filed by Deborah M. Zuckerman, 
Michael Schuster, and American Association of Retired Persons, 
Washington, D.C.; Mary Catherine Fons and Fons Law Firm, 
Stoughton, on behalf of AARP, Consumer Federation of America, 
National 
Association 
of 
Consumer 
Advocates, 
and 
National 
Consumer Law Center. 
 
 
 
2
An amicus curiae brief was filed by Stephen E. Meili, Sarah 
N. Mervine, and University of Wisconsin Law School, Madison, on 
behalf of University of Wisconsin Law School Consumer Law 
Litigation Clinic. 
 
An amicus curiae brief was filed by Frank Tuerkheimer and 
University of Wisconsin Law School, Madison, on behalf of 
University of Wisconsin Law Professors. 
 
2006 WI 53
NOTICE 
This opinion is subject to further 
editing and modification.  The final 
version will appear in the bound 
volume of the official reports.   
No.  2003AP2457  
(L.C. No. 
2002SC13843) 
STATE OF WISCONSIN  
 
 
   : 
IN SUPREME COURT 
 
 
Wisconsin Auto Title Loans, Inc.,  
 
 
Plaintiff-Appellant-Petitioner, 
 
              v. 
 
Kenneth M. Jones,  
 
 
Defendant-Respondent. 
 
FILED 
 
MAY 25, 2006 
 
Cornelia G. Clark 
Clerk of Supreme Court 
 
 
 
 
 
REVIEW of a decision of the Court of Appeals.  Affirmed.   
 
¶1 
SHIRLEY S. ABRAHAMSON, C.J.   This is a review of a 
published decision of the court of appeals affirming an order by 
the circuit court for Milwaukee County, Michael D. Guolee, 
Judge.1  The circuit court denied the motion of Wisconsin Auto 
Title Loans, Inc. to stay judicial proceedings on Kenneth 
Jones's counterclaims and to compel Kenneth Jones, the borrower, 
to arbitrate his counterclaims.  The court of appeals affirmed 
the circuit court's order and we affirm the decision of the 
court of appeals. 
                                                 
1 Wis. Auto Title Loans, Inc. v. Jones, 2005 WI App 86, 280 
Wis. 2d 823, 696 N.W.2d 214. 
No. 
2003AP2457   
 
2 
 
¶2 
The dispositive issue in this case is whether the 
arbitration provision in the loan agreement between Wisconsin 
Auto Title Loans and the borrower is unconscionable and, 
therefore, unenforceable.  If the arbitration provision is 
unconscionable, the circuit court was correct in not staying 
judicial proceedings or compelling arbitration on the borrower's 
counterclaims. 
¶3 
The circuit court concluded that the "arbitration 
provision is unconscionable under general common law contract 
standards . . . and 
the 
unconscionability 
provision 
of 
the 
Wisconsin Consumer Act" and that the provision "is both 
procedurally and substantively unconscionable according to those 
standards."2  Accordingly, the circuit court denied the motion of 
Wisconsin Auto Title Loans to compel arbitration on the 
borrower's counterclaims and to stay the court proceedings.  The 
court 
of 
appeals 
also 
held 
the 
arbitration 
provision 
unconscionable on procedural and substantive grounds. 
¶4 
We hold that the arbitration provision of the loan 
agreement between Wisconsin Auto Title Loans and the borrower is 
unconscionable.   
                                                 
2 The circuit court also based its decision on Wis. Stat. 
§ 402.302(1) 
(2003-04), 
the 
unconscionability 
provision 
of 
Article 2 of the Wisconsin Uniform Commercial Code (U.C.C.) 
statute.  Article 2 of the U.C.C. does not apply to the contract 
in the present case. 
All references to the Wisconsin Statutes are to the 2003-04 
version unless otherwise indicated. 
No. 
2003AP2457   
 
3 
 
¶5 
The challenge to the validity of the arbitration 
provision is to be decided by the courts, even though the 
arbitration provision in the instant contract provides that the 
validity of the arbitration provision is to be decided in 
arbitration.  Indeed, Wisconsin Auto Title Loans does not argue 
that the validity of the arbitration provision must be decided 
in arbitration.  
¶6 
The United States Supreme Court has made it clear that 
although challenges to the validity of a contract as a whole 
must be made in arbitration if the contract so provides, 
challenges to an arbitration provision in a contract may be 
raised in a court proceeding.3  Like the arbitration agreement in 
the instant case, the arbitration agreement in Buckeye Check 
Cashing, Inc. v. Cardegna, No. 04-1264, slip op. at 2 (U.S. Feb. 
21, 2006), expressly provided that the arbitrator was to decide 
challenges to the validity of the arbitration provision.  
Therefore, 
because 
this 
appeal 
addresses 
only 
the 
unconscionability of the arbitration clause, not the validity of 
the contract as a whole, the issue is properly before a court 
and not an arbitrator. 
                                                 
3 See Buckeye Check Cashing, Inc. v. Cardegna, No. 04-1264, 
slip op. at 4, 8 (U.S. Feb. 21, 2006) (citing Prima Paint Corp. 
v. Flood & Conklin Mfg. Co., 388 U.S. 395, 402-04 (1967) 
(adopting an approach to the Federal Arbitration Act that 
"permits a court to deny effect to an arbitration provision in a 
contract that the court later finds to be perfectly enforceable" 
other than an invalid arbitration provision).   
No. 
2003AP2457   
 
4 
 
¶7 
The following factors render the arbitration provision 
procedurally unconscionable: Wisconsin Auto Title Loans was in 
the business of providing loans with automobile titles as 
collateral and was experienced in drafting such loan agreements; 
Wisconsin Auto Title Loans was in a position of substantially 
greater bargaining power than the borrower; the borrower was 
indigent and in need of cash; and the loan agreement was an 
adhesion contract presented to the borrower on a take-it-or-
leave-it basis. 
¶8 
The 
broad, 
one-sided, 
unfair 
"save 
and 
except" 
parenthetical in the arbitration provision of the loan agreement 
allowing Wisconsin Auto Title Loans full access to the courts, 
free of arbitration, while limiting the borrower to arbitration 
renders the arbitration provision substantively unconscionable.  
Other factors support this conclusion of law. 
¶9 
Thus a sufficient quantum of both procedural and 
substantive unconscionability exists to render the arbitration 
provision invalid.  We therefore affirm the decision of the 
court of appeals and remand the matter to the circuit court for 
further proceedings on Wisconsin Auto Title Loans' replevin 
action and the borrower's answer and counterclaims. 
I 
¶10 No evidentiary proceedings were held in the circuit 
court.  The following facts are in the record and are not 
disputed. 
¶11 Wisconsin Auto Title Loans is a Wisconsin corporation 
that provides short-term loans to consumers.   
No. 
2003AP2457   
 
5 
 
¶12 On December 6, 2001, Jones, the borrower, obtained an 
$800 loan from Wisconsin Auto Title Loans.  The borrower and 
Wisconsin Auto Title Loans entered into a loan agreement, 
promissory note, and security agreement providing the borrower 
an $800 loan.  We refer to these documents collectively as the 
"loan agreement."  
¶13 The loan agreement executed by Wisconsin Auto Title 
Loans and the borrower is a pre-printed standard form short-term 
loan agreement provided by Wisconsin Auto Title Loans.  To 
receive the loan, the borrower had to deliver a security 
interest in his motor vehicle, a 1992 Infiniti, in the form of a 
title to Wisconsin Auto Title Loans; purchase a $150, one-year 
membership in Wisconsin Auto Title Loans' "Continental Car 
Club"; and pay a $4 filing fee on the motor vehicle title.4   
¶14 The loan agreement calls for a single payment of 
$1,197.08, due on January 3, 2002, which includes the original 
$800 loan amount, $243.08 of finance charges, and the $154 the 
borrower borrowed from Wisconsin Auto Title Loans to pay 
Wisconsin Auto Title Loans' fees.  Wisconsin Auto Title Loans 
represents in its loan agreement that the annual percentage rate 
for the finance charge is 300%. 
¶15 The loan agreement also includes the arbitration 
provision at issue in the instant case.  The arbitration 
                                                 
4 Because Jones did not have the funds to pay these fees, 
the total amount financed was $954.  However, no interest was 
charged on the $154 Jones borrowed to pay Wisconsin Auto Title 
Loans' fees. 
No. 
2003AP2457   
 
6 
 
provision broadly states that all disputes, controversies, or 
claims between the borrower and Wisconsin Auto Title Loans 
relating to the loan agreement shall be decided by binding 
arbitration.  Nevertheless, the arbitration provision carves out 
for Wisconsin Auto Title Loans the right to enforce the 
borrower's payment obligations in the event of default by 
judicial or other process, including self-help repossession.  
The arbitration provision provides as follows: 
BORROWER 
and 
LENDER 
agree that 
the transactions 
contemplated by, and occurring under, this Agreement 
involve "commerce" under the Federal Arbitration Act 
("FAA") (9 U.S.C. §§ 1 et. seq.).  Any and all 
disputes, 
controversies 
or 
claims (collectively, 
"claims" or "claim"), whether preexisting, present or 
future, between the BORROWER and LENDER, or between 
BORROWER and any of LENDER's officers, directors, 
employees, 
agents, 
affiliates, 
or 
shareholders, 
arising out of or related to this Agreement (save and 
except the LENDER's right to enforce the BORROWER's 
payment obligations in the event of default, by 
judicial 
or 
other 
process, 
including 
self-help 
repossession) shall be decided by binding arbitration 
under 
the 
FAA. 
Any 
and 
all 
claims 
subject 
to 
arbitration hereunder, asserted by any party, will be 
resolved by an arbitration proceeding which shall be 
administered by the American Arbitration Association 
under 
its 
Commercial 
Arbitration 
Rules 
(the 
"Arbitration 
Rules"), 
as 
presently 
published 
and 
existing.  However, in the event that BORROWER 
initiates arbitration, BORROWER shall pay the first 
$125.00 of the filing fee required by the Arbitration 
Rules, and LENDER will pay the remaining amount of 
such fee, as well as any required deposit.  In the 
event LENDER initiates arbitration, LENDER shall pay 
the entire amount of such filing fee and any required 
deposit.  The parties agree to be bound by the 
decision of the arbitrator(s).  Any issue as to 
whether this Agreement is subject to arbitration shall 
be determined by the arbitrator.  This agreement to 
arbitrate 
will 
survive 
the 
termination 
of 
this 
No. 
2003AP2457   
 
7 
 
Agreement. BY AGREEING TO ARBITRATE DISPUTES, YOU 
WAIVE ANY RIGHT YOU MAY OTHERWISE HAVE HAD TO LITIGATE 
CLAIMS THROUGH A COURT OR TO HAVE A JURY TRIAL.5  
¶16 The loan agreement also includes a single printed page 
entitled REMINDER TO BORROWER, including seven reminders.  The 
seventh reminder states as follows: "Please note, this is a 
higher interest loan.  You should go to another source if you 
have the ability to borrow at a rate of interest below 25 
percent per month or 300 percent APR."6  
¶17 At the bottom of this REMINDER is a place for a 
borrower to sign, indicating that he had read the reminder, 
understood its contents, and understood that unless he paid the 
amount due he was placing continued ownership of his automobile 
at risk.  The borrower signed the reminder.  
¶18 Beginning in January 2002, the borrower made several 
partial cash payments on the loan, which Wisconsin Auto Title 
Loans accepted.  On April 22, 2002, Wisconsin Auto Title Loans 
served on the borrower a notice of default on the loan.  The 
notice of default stated that a daily interest rate of $7.84 
                                                 
5 Emphasis added.  Capitalization in original. 
Paragraph 10 on the back of the loan agreement states that 
the agreement shall be governed by the laws of Wisconsin 
including the conflict of laws provision contained in Wis. Stat. 
§ 421.201(5), which provides that the proceedings to recover 
collateral shall be governed by the law of the state where the 
collateral is located at the time of recovery.  The paragraph 
also provides that the unenforceability or invalidity of any 
portion of the agreement shall not render unenforceable or 
invalid the remaining portions thereof. 
6 Bold in original. 
No. 
2003AP2457   
 
8 
 
would be added to the original loan and that in order to avoid 
litigation and repossession of the car, the borrower had to 
repay the loan plus interest and penalties on or before May 6, 
2002.   
¶19 The amount owing as of April 22, 2002 was $1,509.72.  
The amount owing as of May 6, 2002 was stated to be $1,627.32.  
The notice of default advised the borrower that if he did not 
pay the total past due including interest by the date stated or 
make arrangements for payment, Wisconsin Auto Title Loans had 
"THE RIGHT TO COMMENCE ACTION FOR YOUR ENTIRE OUTSTANDING 
BALANCE AND/OR FOR REPOSSESSION OF YOUR MOTOR VEHICLE SECURING 
THE NOTE WITHOUT FURTHER NOTICE, DEMAND, OR RIGHT TO CURE."7   
¶20 On May 10, 2002, Wisconsin Auto Title Loans commenced 
an action to recover possession of the borrower's 1992 Infiniti.  
The complaint, labeled "small claims-replevin," stated that it 
sought to enforce a cause of action arising from a consumer 
credit transaction and that the borrower did not have the right 
to cure a default under Wis. Stat. § 425.205. 
¶21 The borrower filed an answer admitting that the 
consumer credit transaction described in the complaint occurred 
between the parties.  The answer alleged, inter alia, that the 
full documents were not attached or identified in the complaint 
(but were attached to the answer), denied Wisconsin Auto Title 
Loans' calculation of the amount financed, interest, and balance 
due, and denied any obligation to pay amounts stated in the 
                                                 
7 Capitalization and bold in original. 
No. 
2003AP2457   
 
9 
 
complaint to exercise the right to redeem the collateral.  The 
answer requested that the complaint be dismissed with prejudice, 
together with remedies available under Wis. Stat. §§ 425.301-
425.311.  The answer also sought the relief requested in the 
counterclaims.  
¶22 The borrower alleged counterclaims both for himself 
and as class claims (on behalf of a class of all similarly 
situated customers of Wisconsin Auto Title Loans).  The 
counterclaims assert that Wisconsin Auto Title Loans willfully 
and knowingly conceals consumer loan transaction costs to its 
customers, imposes loan interest and other finance charges 
without proper disclosures, engages in collection practices 
without properly advising its customers of their rights and 
obligations, and imposes unconscionably exorbitant loan rates 
and charges, and that the loan agreement was unconscionable 
under Wis. Stat. § 425.107.  The borrower made a jury demand for 
his counterclaims and the case was transferred from small claims 
to the circuit court. 
¶23 Wisconsin 
Auto 
Title 
Loans 
did 
not 
answer 
the 
counterclaims but moved to compel the borrower to arbitrate the 
counterclaims in accordance with the terms of the parties' 
agreement and pursuant to the Federal Arbitration Act and Wis. 
Stat. § 788.03.  Wisconsin Auto Title Loans also moved to stay 
litigation of the counterclaims pending arbitration.  Wisconsin 
Auto Title Loans did not move to stay litigation with respect to 
No. 
2003AP2457   
 
10 
 
the original replevin complaint.8  The borrower opposed Wisconsin 
Auto Title Loans' motion on the grounds that the express terms 
of the arbitration provision provide for issues relating to 
default on the loan to be resolved in a judicial forum and that 
the arbitration provision is not valid or enforceable under 
common and statutory law. 
¶24 The circuit court held the arbitration provision 
unconscionable.  The court of appeals granted Wisconsin Auto 
Title Loans' request to appeal the nonfinal order of the circuit 
court and affirmed the circuit court's order denying Wisconsin 
                                                 
8 The written motion is as stated.  Wisconsin Auto Title 
Loans suggested at oral argument that at the motion hearing 
before the circuit court it may have attempted to modify its 
motion to stay the borrower's counterclaims into a motion to 
stay 
the 
entire 
proceeding 
pending 
the 
result 
of 
the 
arbitration.  This modification, however, is not reflected in 
the circuit court's final order on the motion, and we assume 
that the motion was as the circuit court stated it. 
In its briefs on the motion, Wisconsin Auto Title Loans 
asserted that all claims other than the replevin action were 
subject to arbitration and that the borrower's counterclaims 
fell within the arbitration provision.   
In his brief, the borrower argued that Wisconsin Auto Title 
Loans wrongly asserted that he could not bring his defenses and 
counterclaims before the court.   
Wisconsin Auto Title Loans clarified in its reply brief 
that the borrower did have the right to put forth his defenses 
to the replevin action, but that he could not bring his 
counterclaims.   
Following an oral hearing on the motion, the circuit court 
issued an oral ruling on August 20, 2003 denying Wisconsin Auto 
Title Loans' motion to compel arbitration and stay proceedings.  
The oral decision and written order treated the motion as 
written. 
No. 
2003AP2457   
 
11 
 
Auto Title Loans' motion to compel arbitration.  Wisconsin Auto 
Title Loans petitioned for review by this court, and we granted 
review. 
II 
¶25 The 
validity 
of 
a 
contract 
provision 
involves 
determinations of fact and law.9  A reviewing court will not set 
aside 
a 
circuit 
court's 
finding 
of 
fact 
unless 
clearly 
erroneous, that is, unless the finding is against the great 
weight and clear preponderance of the evidence.10  Whether the 
facts found by the circuit court render a contractual provision 
unconscionable is a question of law that a reviewing court 
determines independently of the circuit court and court of 
appeals but benefiting from the analysis of these courts.11    
III 
¶26 We begin by examining the rules of law for determining 
whether an arbitration provision is unconscionable.  Several 
basic principles come into play.   
¶27 First, contract law is grounded on the principle of 
freedom of contract, which protects the justifiable expectations 
                                                 
9 Wassenaar v. Panos, 111 Wis. 2d 518, 525, 331 N.W.2d 357, 
361 (1983); Leasefirst v. Hartford Rexall Drugs, Inc., 168 
Wis. 2d 83, 88, 483 N.W.2d 585 (Ct. App. 1992). 
10 Wassenaar, 111 Wis. 2d at 525 (citing Fields Found., Ltd. 
v. Christensen, 103 Wis. 2d 465, 475, 309 N.W.2d 125 (Ct. App. 
1981)) (addressing the validity of a stipulated damages clause); 
see Wis. Stat. § 805.17(2). 
11 Household Utils., Inc. v. Andrews Co., 71 Wis. 2d 17, 25, 
236 N.W.2d 663 (1976); Zubek v. Edlund, 228 Wis. 2d 783, 788, 
598 N.W.2d 273 (Ct. App. 1999); Leasefirst, 168 Wis. 2d at 89. 
No. 
2003AP2457   
 
12 
 
of 
parties 
to 
an 
agreement, 
free 
from 
governmental 
interference.12   
 
¶28 Second, arbitration provisions are presumed to be 
valid in Wisconsin.13  An arbitration provision, however, may be 
invalid for reasons that apply to all contract provisions.14 
                                                 
12 Merten v. Nathan, 108 Wis. 2d 205, 211, 321 N.W.2d 173 
(1982) ("The law of contracts is based on the principle of 
freedom of contract, on the principle that individuals should 
have the power to govern their own affairs without governmental 
interference.  The courts protect each party to a contract by 
ensuring that the promises will be performed.  The law protects 
justifiable expectations and the security of transactions."). 
13 See Kemp v. Fisher, 89 Wis. 2d 94, 100, 277 N.W.2d 859 
(1979) 
("Because 
of 
this 
state's 
policy 
of 
encouraging 
arbitration as an alternative to litigation, arbitration awards 
are presumed to be valid."). 
9 U.S.C. § 2, the coverage provision of the Federal 
Arbitration Act (FAA), states: 
A written provision in any maritime transaction or a 
contract evidencing a transaction involving commerce 
to settle by arbitration a controversy thereafter 
arising out of such contract or transaction, or the 
refusal to perform the whole or any part thereof, or 
an agreement in writing to submit to arbitration an 
existing controversy arising out of such a contract, 
transaction, or refusal, shall be valid, irrevocable, 
and enforceable, save upon such grounds as exist at 
law or in equity for the revocation of any contract. 
Wisconsin Stat. § 788.01 (2003-04), the Wisconsin analogue to 
the Federal Arbitration Act, states: 
A provision in any written contract to settle by 
arbitration a controversy thereafter arising out of 
the contract, or out of the refusal to perform the 
whole or any part of the contract, or an agreement in 
writing between 2 or more persons to submit to 
arbitration any controversy existing between them at 
the time of the agreement to submit, shall be valid, 
irrevocable and enforceable except upon such grounds 
No. 
2003AP2457   
 
13 
 
¶29 Third, a contract provision is invalid if it is 
unconscionable.15  The concept of unconscionability has deep 
roots in both law and equity but was developed primarily in 
                                                                                                                                                             
as exist at law or in equity for the revocation of any 
contract.  This chapter shall not apply to contracts 
between employers and employees, or between employers 
and associations of employees, except as provided in 
s. 111.10, nor to agreements to arbitrate disputes 
under s. 101.143(6s) or 230.44(4)(bm). 
14 See, e.g., United Artists Corp. v. Odeon Bldg., 212 Wis. 
150, 153-55, 248 N.W. 784 (1933) (arbitration provision that 
violated Sherman Anti-Trust Act is invalid); Appleton Papers, 
Inc. v. Home Indem. Co., 2000 WI App 104, ¶4, 235 Wis. 2d 39, 
612 N.W.2d 760 (mandatory arbitration clause not approved by 
insurance commissioner is invalid); Armendariz v. Found. Health 
Psychcare Servs., Inc., 6 P.3d 669, 679 (Cal. 2000) (arbitration 
agreement 
may 
be 
invalidated 
for 
same 
reasons 
as 
other 
contracts). 
15 See, e.g., 8 Richard A. Lord, Williston on Contracts 
§18.13, at 87-88 
(4th ed. 
1998); 
John E. Murray, 
Jr., 
Unconscionability: Unconscionability, 31 U. Pitt. L. Rev. 1 
(1969); 2 Restatement (Second) Contracts § 208 (1979) (a court 
may refuse to enforce an unconscionable term or contract).  
Unconscionability 
has 
been 
codified 
in 
various 
statutes.   
Wis. Stat. § 402.302 (under the Wisconsin U.C.C., "[i]f the 
court as a matter of law finds the contract or any clause of the 
contract to have been unconscionable at the time it was made the 
court may refuse to enforce the contract . . . ."); Wis. Stat. 
§ 425.107 (Under the Wisconsin Consumer Protection Act, "[w]ith 
respect to a consumer credit transaction, if the court as a 
matter of law finds that any aspect of the transaction, any 
conduct directed against the customer by a party to the 
transaction, or any result of the transaction is unconscionable, 
the court shall . . . either refuse to enforce the transaction 
against the customer, or so limit the application of any 
unconscionable aspect or conduct to avoid any unconscionable 
result."). 
No. 
2003AP2457   
 
14 
 
equity.16  For a contract or a contract provision to be declared 
invalid as unconscionable, the contract or contract provision 
must be determined to be both procedurally and substantively 
unconscionable.17  
¶30 Fourth, a party seeking to invalidate a provision in a 
contract (here the borrower) has the burden of proving facts 
that justify a court's reaching the legal conclusion that the 
provision is invalid.18   
¶31 Unconscionability is an amorphous concept that evades 
precise definition.19  Indeed, it has been said that "[i]t is not 
possible to define unconscionability.  It is not a concept but a 
determination to be made in light of a variety of factors not 
unifiable into a formula."20   
                                                 
16 7 Joseph M. Perillo, Corbin on Contracts § 29.2 (rev. ed. 
2002).  For a discussion of unconscionability in other legal 
systems, see Symposium, Unconscionability Around the World: 
Seven Perspectives on the Contractual Doctrine, 14 Loy. L.A. 
Int'l & Comp. L. Rev. 435 (1992). 
17 Deminsky v. Arlington Plastics Mach., 2003 WI 15, ¶27, 
259 Wis. 2d 587, 657 N.W.2d 411; Discount Fabric House of 
Racine, Inc. v. Wisconsin Tel. Co., 117 Wis. 2d 587, 602, 345 
N.W.2d 417 (1984). 
18 See Wassenaar, 111 Wis. 2d at 526 (burden of proof is on 
employee asserting that a liquidated damages provision is an 
unenforceable penalty). 
19 1 E. Allan Farnsworth, Farnsworth on Contracts § 4.28, at 
581 (3d ed. 2004); 7 Perillo, supra note 16, § 29.4, at 387-88; 
8 Lord, supra note 15, § 18.7, at 46. 
20 1 James J. White & Robert S. Summers, Uniform Commercial 
Code § 4-3, at 213 (4th ed. 1995) (emphases removed). 
No. 
2003AP2457   
 
15 
 
¶32 We have made several attempts at delineating what is 
meant by unconscionability.  The underlying principle that has 
evolved in such attempts is that "[t]he principle is one of 
prevention 
of 
oppression 
or 
unfair 
surprise 
and 
not 
of 
disturbance 
of 
allocation 
of 
risks 
because 
of 
superior 
bargaining power."21  Unconscionability has often been described 
as the absence of meaningful choice on the part of one of the 
parties, together with contract terms that are unreasonably 
favorable to the other party.22   
¶33 A 
determination 
of 
unconscionability 
requires 
a 
mixture of both procedural and substantive unconscionability 
that is analyzed on a case-by-case basis.23  The more substantive 
                                                 
21 8 Lord, supra note 15, § 18.8, 49-50 (quoting Uniform 
Commercial Code § 2-302, cmt. 1, 1A U.L.A. 344 (2004)) (internal 
quotation marks omitted). 
22 Deminsky, 259 Wis. 2d 587, ¶27; Discount Fabric House, 
117 Wis. 2d at 601; Leasefirst, 168 Wis. 2d at 89; Official 
Uniform Commercial Code § 2-302 cmt. 1, 1A U.L.A. 344 (2004); 1 
Farnsworth, supra note 19, § 4.28, at 582; 7 Perillo, supra note 
16, § 29.4, at 46-47; 2 Restatement (Second) of Contracts § 208, 
cmt. d, at 109 (1979).  
23 Deminsky, 259 Wis. 2d 587, ¶27; Discount Fabric House, 
117 Wis. 2d at 602.  
Wisconsin Auto Title Loans calls our attention to Battle v. 
Nissan Motor Acceptance Corp., No. 05-CV-00669 (E.D. Wis. March 
9, 2006) (decision and order granting in part and denying in 
part defendant's motion to compel arbitration, denying motion to 
stay proceedings, setting scheduling conference, and requiring 
Rule 26 report).  In Battle, the district court for the Eastern 
District of Wisconsin determined that an arbitration provision 
was not unconscionable.  Battle is factually distinguishable 
from the instant case. 
 
No. 
2003AP2457   
 
16 
 
unconscionability present, the less procedural unconscionability 
is required, and vice versa.24  A court will weigh all the 
elements of unconscionability and may conclude unconscionability 
exists because of the combined quantum of procedural and 
substantive unconscionability.25  "To tip the scales in favor of 
unconscionability requires a certain quantum of procedural plus 
a certain quantum of substantive unconscionability."26 
¶34 Determining 
whether 
procedural 
unconscionability 
exists requires examining factors that bear upon the formation 
of the contract, that is, whether there was a "real and 
voluntary meeting of the minds" of the contracting parties.27  
                                                 
24 Discount Fabric House, 117 Wis. 2d at 602; see also 1 
Farnsworth, supra note 19, § 4.28, at 585 ("Most cases of 
unconscionability involve 
a 
combination 
of 
procedural and 
substantive unconscionability, and it is generally agreed that 
if more of one is present, then less of the other is 
required."); 8 Lord, supra note 15, § 18:10, at 62 ("It has 
often been suggested that a finding of a procedural abuse, 
inherent in the formation process, must be coupled as well with 
an unfair or unreasonably harsh contractual term which benefits 
the drafting party at the other party's expense."). 
25 1 Farnsworth, supra note 19, § 4.28, at 585.  
26 Discount Fabric House, 117 Wis. 2d at 602; see also 
Restatement (Second) of Contracts § 208 cmt. d (1974) ("[G]ross 
inequality of bargaining power, together with terms unreasonably 
favorable to the stronger party, may . . . show that the weaker 
party had no meaningful choice, no real alternative, . . . to 
the unfair terms."); see 1 Farnsworth, supra note 19, § 4.28, at 
585. 
27 Deminsky, 259 Wis. 2d 587, ¶27; Discount Fabric House, 
117 Wis. 2d at 602 (quoting Johnson v. Mobil Oil Corp., 415 F. 
Supp. 264, 268 (E.D. Mich. 1976)); Leasefirst, 168 Wis. 2d at 
89-90. 
No. 
2003AP2457   
 
17 
 
The factors to be considered include, but are not limited to, 
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 would have been permitted by the drafting 
party, and whether there were alternative providers of the 
subject matter of the contract.28 
¶35 Substantive unconscionability addresses the fairness 
and 
reasonableness 
of 
the 
contract 
provision 
subject 
to 
challenge.  Wisconsin courts determine whether a contract 
provision is substantively unconscionable on a case-by-case 
basis.29 
                                                                                                                                                             
As Professor Arthur Allen Leff described it, procedural 
unconscionability refers to "bargaining naughtiness."  Arthur 
Allen Leff, Unconscionability and the Code——The Emperor's New 
Clause, 115 U. Pa. L. Rev. 485, 487 (1967) (quoted in 1 White & 
Summers, supra note 20, § 4-3, at 213). 
28 Discount Fabric House, 117 Wis. 2d at 602 (quoting 
Johnson, 415 F. Supp. at 268); see also Wis. Stat. § 425.107 
(unconscionability factors under the Wisconsin Consumer Act). 
29 See Pietroske, Inc. v. Globalcom, Inc., 2004 WI App 142, 
¶6, 275 Wis. 2d 444, 685 N.W.2d 884 (holding, in the context of 
a forum-selection provision, that "[t]he balancing of procedural 
and substantive unconscionability requires courts to consider 
each questionable forum-selection clause on a case-by-case basis 
and precludes the development of a bright-line rule").  
No. 
2003AP2457   
 
18 
 
¶36 No 
single, 
precise 
definition 
of 
substantive 
unconscionability 
can 
be 
articulated. 
 
Substantive 
unconscionability refers to whether the terms of a contract are 
unreasonably favorable to the more powerful party.30  The 
analysis of substantive unconscionability requires looking at 
the contract terms and determining whether the terms are 
"commercially reasonable,"31 that is, whether the terms lie 
outside the limits of what is reasonable or acceptable.32  The 
                                                                                                                                                             
See also 8 Lord, supra note 15, § 18.8, at 48 ("The framers 
of the [Uniform Commercial] Code naturally expected the courts 
to . . . pour content into [the unconscionability doctrine] on a 
case-by-case basis."); Uniform Consumer Credit Code, § 5.108 
cmt. 3, 7A U.L.A. 170 (1974) ("The particular facts involved in 
each case are of utmost importance since certain conduct, 
contracts or contractual provisions may be unconscionable in 
some situations but not in others."); Restatement (Second) of 
Contracts § 208 cmt. a (1974) ("The determination that a 
contract is or is not unconscionable is made in light of its 
setting, purpose and effect."). 
30 8 Lord, supra note 15, §18.10, at 57. 
31 Discount Fabric House, 117 Wis. 2d at 602 (quoting 
Johnson, 415 F. Supp. at 268). 
32 See generally 8 Lord, supra note 15, § 18.10, at 48-49, 
which quotes the comments to the Uniform Commercial Code 
unconscionability provision, § 2-302: 
The principle is one of prevention of oppression and 
unfair surprise and not of disturbance of allocation 
of risks because of superior bargaining power. The 
basic test is whether, in the light of the general 
commercial background and the commercial needs of the 
particular trade or case, the term or contract 
involved is so one-sided as to be unconscionable under 
the circumstances existing at the time of the making 
of the contract. 
Uniform Commercial Code § 2-302 cmt. 1, 1A U.L.A. 344 (2004). 
No. 
2003AP2457   
 
19 
 
issue of unconscionability is considered "in the light of the 
general commercial background and the commercial needs."33   
¶37 We turn now to the instant case to determine whether 
the 
arbitration 
provision 
in 
the 
loan 
agreement 
is 
unconscionable.   
A 
¶38 Here 
we 
address 
the 
issue 
of 
procedural 
unconscionability.  We first examine the circuit court's 
findings of fact and then determine whether the facts of record 
support 
the 
conclusion 
of 
law 
regarding 
procedural 
unconscionability. 
¶39 Wisconsin Auto Title Loans argues that the circuit 
court's findings of fact are clearly erroneous, that is, they 
are not supported by evidence in the record or reasonable 
inference therefrom.  Wisconsin Auto Title Loans asserts that 
the circuit court failed to hold a required evidentiary hearing 
and that the circuit court erroneously based its findings of 
fact 
on 
the 
pleadings and 
trial 
briefs, 
not 
evidence.34   
Wisconsin Auto Title Loans asserts that the only evidence the 
                                                 
33 See generally 8 Lord, supra note 15, §18.5, at 22-28 
(explaining the extension 
of unconscionability 
beyond the 
U.C.C.). 
34 The court of appeals concluded that because Wisconsin 
Auto Title Loans did not suggest an evidentiary hearing in the 
circuit court and did not mention the absence of such a hearing 
until its reply brief in the court of appeals, Wisconsin Auto 
Title Loans waived its objections to the circuit court's factual 
findings 
supporting 
its 
determination 
of 
procedural 
unconscionability.  Wis. Auto Title Loans, 280 Wis. 2d 823, ¶17.  
No. 
2003AP2457   
 
20 
 
borrower provided was the contract itself; he submitted no 
affidavit 
evidence 
establishing 
the 
particulars 
of 
his 
situation.35   
¶40 The circuit court did not hold an evidentiary hearing.  
Wisconsin Auto Title Loans bases its argument that the lack of 
an 
evidentiary 
hearing 
is 
fatal 
to 
a 
procedural 
unconscionability determination on Datronic Rental Corp. v. 
DeSol, Inc., 164 Wis. 2d 289, 474 N.W.2d 780 (Ct. App. 1991).  
In that case, the court of appeals stated that "an evidentiary 
hearing is required to enable the court to make the necessary 
findings of fact to support a conclusion that a clause is 
unconscionable."36  Although an evidentiary hearing is ordinarily 
required as a basis for the necessary findings of fact, an 
evidentiary hearing may not always be necessary to support a 
determination of unconscionability. 
¶41 Facts may, under certain circumstances, be determined 
without an evidentiary hearing.  For example, facts may be 
                                                 
35 Plaintiff-Appellant-Petitioner's Brief and Appendix at 
22. 
36 Datronic Rental Corp. v. DeSol, Inc., 164 Wis. 2d 289, 
294, 474 N.W.2d 780 (Ct. App. 1991); see Leasefirst, 168 
Wis. 2d at 89-90 (citing Datronic, 164 Wis. 2d at 294).   
The unconscionability provision of Wisconsin's U.C.C., 
Wis. Stat. § 402.302, states that "the parties shall be afforded 
a reasonable opportunity to present evidence as to [the 
contract's] commercial setting, purpose and effect to aid the 
court in making the determination."   
The unconscionability determination in the instant case is 
not based on the U.C.C. 
No. 
2003AP2457   
 
21 
 
deemed agreed upon when they are not denied by answer.37  Parties 
may stipulate to the facts.38  A court may take judicial notice 
of certain facts.39  A circuit court may make reasonable 
inferences from the facts of record.40  Thus, an evidentiary 
hearing is not required so long as the record contains facts of 
record and reasonable inferences therefrom sufficient to support 
a circuit court's findings of fact from which a court may reach 
a decision about procedural unconscionability.  
¶42 Thus, we must examine the record in the instant case 
for the facts of record and the reasonable inferences to be 
drawn therefrom and determine whether these facts and inferences 
are sufficient to support a conclusion of law regarding whether 
the arbitration provision is procedurally unconscionable. 
¶43 The circuit court made the following findings of fact 
relating to procedural unconscionability:  
1. The borrower obtained a loan from Wisconsin Auto Title 
Loans using his automobile as collateral; 
                                                 
37 Wis. Stat. § 802.02(4) ("Averments in a pleading to which 
a responsive pleading is required, other than those as to the 
fact, nature and extent of injury and damage, are admitted when 
not denied in the responsive pleading . . . ."); Mitchell Bank 
v. Schanke, 2004 WI 13, ¶34, 268 Wis. 2d 571, 676 N.W.2d 849 
(under § 802.02(4), facts not denied are deemed admitted). 
38 State v. Lombard, 2004 WI App 52, ¶25, 271 Wis. 2d 529, 
678 N.W.2d 338. 
39 Ch. 902, Wis. Stats. (Rule) (2003-04); Fringer v. Venema, 
26 Wis. 2d 366, 372-73, 132 N.W.2d 565 (1965). 
40 See Hedtcke v. Sentry Ins. Co., 109 Wis. 2d 461, 471, 326 
N.W.2d 727 (1982) (quoting Howard v. Duersten, 81 Wis. 2d 301, 
305, 260 N.W.2d 274 (1977)).  
No. 
2003AP2457   
 
22 
 
2. The loan agreement contained various conditions and 
requirements;  
3. The loan was not repaid to Wisconsin Auto Title Loans' 
satisfaction;  
4. Wisconsin Auto Title Loans is experienced in the 
business of supplying loans for which title to an automobile is 
provided as collateral; 
5. Wisconsin Auto Title Loans is experienced in drafting 
loan agreements;  
6. Wisconsin Auto Title Loans was in a position of greater 
bargaining power than the borrower;  
7. The loan agreement was presented to the borrower in a 
"take-it-or-leave-it" manner; 
8. The borrower was unemployed and needed the funds for 
household expenses; and 
9. The terms of the arbitration agreement were not 
explained to the borrower.    
¶44 The first two findings of fact stated above are based 
on documents in the record.  Specifically, that the borrower 
obtained a loan from Wisconsin Auto Title Loans including 
various conditions and requirements and using his automobile as 
collateral are facts set forth in the documents that both 
parties agree make up the loan agreement. 
¶45 The third finding of fact, that the loan was not 
repaid to Wisconsin Auto Title Loans' satisfaction, is evident 
from Wisconsin Auto Title Loans' filing the action.  
No. 
2003AP2457   
 
23 
 
¶46 The fourth finding of fact, that Wisconsin Auto Title 
Loans is experienced in the business of supplying loans with 
title to an automobile as collateral, is the circuit court's 
reasonable inference from the documents in the records.  The 
circuit court could have reasonably made this inference from the 
name of the company and from its "tag line" appearing on the 
documents of record.  The tag line reads, "The Cash You 
Need . . . Fast" (ellipses in original). 
¶47 The fifth finding of fact, that Wisconsin Auto Title 
Loans is experienced in drafting loan agreements, is apparent 
from the loan agreement forms in the record.  The loan agreement 
is identified as "Contract #8429," implying that Wisconsin Auto 
Title Loans has engaged in a substantial number of loan 
transactions.  Furthermore, the loan agreement, the Continental 
Car Club membership documents, and the "Reminder to Borrower" 
are all pre-printed, standardized documents, except for the 
relevant dollar amounts and due dates, Wisconsin Auto Title 
Loans' name and address, the borrower's name and address, the 
pertinent information about the borrower's motor vehicle, and 
the signatures.  The only insertions typed on the forms are to 
complete the forms for the individual involved.41 
¶48 It would not have been reasonable for the circuit 
court to infer that the borrower showed up at the office of 
                                                 
41 It is unclear from the record whether the typing was done 
with a typewriter or whether the document was stored in a 
computer and accessed by Wisconsin Auto Title Loans' agent, who 
filled in the blanks and printed the loan agreement. 
No. 
2003AP2457   
 
24 
 
Wisconsin Auto Title Loans with his own pre-printed forms.  The 
only reasonable inference the circuit court could have made was 
the inference it did make, namely that Wisconsin Auto Title 
Loans drafted the pre-printed loan agreement or determined which 
printed standardized forms to use.   
¶49 The circuit court could have reasonably inferred the 
sixth finding of fact, namely that Wisconsin Auto Title Loans 
was in a position of greater bargaining power, from the facts in 
the record.  The lender is experienced in the business of making 
No. 
2003AP2457   
 
25 
 
short-term auto loans, while the borrower is indigent.42  It was 
reasonable for the circuit court to infer a significant 
disparity between the parties' bargaining power and commercial 
sophistication. 
                                                 
42 Disparity in bargaining power alone is not necessarily 
sufficient to establish procedural unconscionability.  See 
Discount Fabric House, 117 Wis. 2d at 602 (quoting Johnson, 415 
F. Supp. at 268); see also 2 Restatement (Second) Contracts 
§ 208 cmt. d (1979) ("A bargain is not unconscionable merely 
because the parties to it are unequal in bargaining position, 
nor even because the inequality results in an allocation of 
risks to the weaker party.  But gross inequality of bargaining 
power, together with terms unreasonably favorable to the 
stronger party, may confirm indications that the transaction 
involved elements of deception or compulsion, or may show that 
the weaker party had no meaningful choice, no real alternative, 
or did not in fact assent or appear to assent to the unfair 
terms."); 7 Perillo, supra note 16, § 29.4, at 392 ("Uniform 
Commercial Code § 2-302 is not intended to cause a 'disturbance 
of allocation of risks because of superior bargaining power,' 
but cases . . . make it clear that inequality of bargaining 
power 
is 
an 
important 
element 
in 
an 
unconscionability 
determination." (footnote omitted)); 1 Farnsworth, supra note 
19, § 4.28, at 583-84 (listing unequal bargaining power as one 
of 
several 
factors 
to 
be 
considered 
under 
procedural 
unconscionability); 8 Lord, supra note 15, § 18.5, at 29-30 
(suggesting that unequal bargaining power is but one element of 
procedural unconscionability); 1 Patricia F. Fonseca & John R. 
Fonseca, Williston on Sales § 11:11, at 608 (5th ed. rev. vol. 
2005) (listing unequal bargaining power as one of several 
elements 
that 
go 
into 
determination 
of 
procedural 
unconscionability); 1 White & Summers, supra note 20, § 4-3, at 
217 (suggesting that unequal bargaining power is only one 
element, albeit often a critical element, of a procedural 
unconscionability 
determination); 
1 
William 
D. 
Hawkland, 
Hawkland UCC Series § 2-302:3, at Art. 2-362 (2001) (procedural 
unconscionability requires looking at the totality of the 
circumstances); 2A Ronald A. Anderson, Anderson on the Uniform 
Commercial 
Code 
§ 2-302:98, 
at 
280 
(totality 
of 
the 
circumstances test applies to unconscionability). 
No. 
2003AP2457   
 
26 
 
¶50 Although the specifics of the borrower's financial 
situation are not in the record, the record and reasonable 
inferences drawn therefrom make it clear that the borrower was 
indigent, needed money, and was in a weak bargaining position.  
According to the record, six months after the execution of the 
loan 
agreement, 
the 
borrower 
executed 
an 
affidavit 
and 
petitioned the circuit court for waiver of the fee to remove the 
case from small claims court to circuit court.  The circuit 
court granted the fee waiver, thus recognizing that "because of 
poverty" the borrower "is unable to pay the costs" of the court 
proceeding.43  In addition, it seems unlikely that a person with 
financial means and a strong bargaining position would agree to 
borrow money on the terms of the borrower's loan with Wisconsin 
Auto Title Loans. 
¶51 Moreover, the Reminder to Borrower document (which is 
part of the loan agreement) advised the borrower that he was 
entering into a "higher interest loan" and that he should go to 
another source if he had the ability to borrow at a rate of 
interest below 25% per month and 300% per annum.  From this 
fact, the circuit court drew the reasonable inference that the 
borrower had to sign the loan agreement as presented.  The 
borrower apparently lacked a meaningful, alternative means to 
obtain a more favorable loan. 
¶52 The seventh finding of fact, that the loan agreement 
was presented to the borrower in a "take-it-or-leave-it" manner, 
                                                 
43 Wis. Stat. § 814.29. 
No. 
2003AP2457   
 
27 
 
may be reasonably inferred by the circuit court from all the 
circumstances described above.  The pre-printed form contract 
involved in the present case is what is known in law as an 
adhesion contract, that is, a contract entirely prepared by one 
party and offered to another who does not have the time or the 
ability to negotiate about the terms.44  In other words, a 
contract of adhesion is a "standardized contract, which, imposed 
and drafted by the party of superior bargaining strength, 
relegates to the subscribing party only the opportunity to 
adhere to the contract or reject it."45   
¶53 Standardized form contracts are suspect because they 
may indicate the inequality of bargaining power between the 
                                                 
44 "A 
contract 
of 
adhesion 
is 
generally 
found 
under 
circumstances in which a party has, in effect, no choice but to 
accept the contract offered, often where the buyer does not have 
the opportunity to do comparative shopping or the organization 
offering the contract has little or no competition."  Deminsky, 
259 Wis. 2d 587, ¶31 (citing Katze v. Randolph & Scott Mut. Fire 
Ins. Co., 116 Wis. 2d 206, 212-13, 341 N.W.2d 689 (1984). 
See, e.g., Sugden v. Bock, 2002 WI App 49, ¶15 n.5, 251 
Wis. 2d 344, 641 N.W.2d 693 (quoting Insurance Law——Extension of 
Coverage by Estoppel, 1970 Wis. L. Rev. 1234, 1240 (1970) 
(suggesting that insurance contracts are the "hallmark of a 
contract of adhesion" and describing the contracts as "entirely 
prepared by the insurer and sold to buyers who rarely have the 
time or the ability to fully understand its complicated 
provisions.  This inequality between the parties to the 
insurance contract, combined with the fact that insurance is 
considered a necessity by most people, creates a relationship of 
special trust and confidence between the insurer and the 
insured." (internal quotation marks omitted))). 
45 ACORN v. Household Int'l, Inc., 211 F. Supp. 2d 1160, 
1168 (N.D. Cal. 2002) (quoting Armendariz, 6 P.3d at 689) 
(discussing unconscionability under California law). 
No. 
2003AP2457   
 
28 
 
parties to the contract.46  Ordinarily, however, adhesion 
contracts are valid.47  The court of appeals has correctly 
acknowledged 
that 
not 
every 
transaction 
is 
individually 
negotiated.  Standardized form contracts are common and allow 
for savings in transaction costs.48  Nonetheless, one of the 
attributes of contracts of adhesion is that they are typically 
offered on a take-it-or-leave-it basis with no opportunity for 
negotiation or modification.  Thus, the circuit court reasonably 
inferred from the unmodified, pre-printed forms and the unequal 
                                                 
46 Arthur Allen Leff, Unconscionability and the Crowd——
Consumers and the Common Law Tradition, 31 U. Pitt. L. Rev. 349, 
349 (1970).  When a standardized contract is consistent with the 
terms 
the 
parties 
actually 
negotiated, 
no 
inequality 
of 
bargaining power or procedural unconscionability arises.  8 
Lord, supra note 15, § 18.13, at 84-85. 
47 Clark Oil & Ref. Corp. v. Leistikow, 69 Wis. 2d 226, 239, 
230 N.W.2d 736 (1975). 
48 Pietroske, Inc., 275 Wis. 2d 444, ¶9.  
See 7 Perillo, supra note 16, § 29.10, at 416 ("There is 
nothing inherently wrong with a contract of adhesion.  Most of 
the transactions of daily life involve such contracts that are 
drafted by one party and presented on a take it or leave it 
basis.  They simplify standard transactions . . . ."). 
See also 1 Farnsworth, supra note 19, § 4.28 at 585-86 (fact 
that a contract is one of adhesion is not fatal); 8 Lord, supra 
note 15, § 18:13, at 83-85 ("[A] form contract will not 
generally be found unconscionable if there were negotiations on 
the essential term at issue, such as price."); 1 Fonseca & 
Fonseca, supra note 42, § 11:12, at 610 (case law indicates that 
a form contract alone is not enough to support a determination 
of substantive unconscionability; other factors must also be 
present); 1 White & Summers, supra note 20, § 4-3, at 217 
(arguing that not all form or "fine print" contracts should be 
held unconscionable under § 2-302 of the U.C.C.). 
No. 
2003AP2457   
 
29 
 
bargaining power of the parties that the loan agreement in the 
instant matter was a take-it-or-leave-it contract presented by 
Wisconsin Auto Title Loans with no opportunity for negotiation 
or modification by the borrower.     
¶54 The eighth finding of fact, namely that the borrower 
was unemployed and needed funds for household expenses, is not 
supported by evidence in the record and cannot reasonably be 
inferred from the record. 
¶55 The ninth finding of fact, namely that the terms of 
the arbitration agreement were not explained to the borrower, is 
not supported by evidence in the record and cannot reasonably be 
inferred from the record. 
¶56 The eighth and ninth findings of fact are derived from 
the pleadings and the borrower's trial brief. 
¶57 Thus, circuit court's findings of fact 1 through 7 are 
supported by the evidence in the record, and these findings lead 
to our conclusion of law (and the conclusion of law reached by 
the court of appeals and circuit court) that a quantum of 
procedural 
unconscionability 
has 
been 
established. 
 
The 
formation of the contract was a product of the parties' unequal 
bargaining power and did not reflect a real and voluntary 
meeting of the minds of the contracting parties.49  
¶58 Wisconsin Auto Title Loans points out that the loan 
agreement is short and written in plain English.  Perhaps so, 
                                                 
49 Discount Fabric House, 117 Wis. 2d at 602 (quoting 
Johnson, 415 F. Supp. at 268); Leasefirst, 168 Wis. 2d at 89-90. 
No. 
2003AP2457   
 
30 
 
but the fact that a contract is written in plain English does 
not alone 
defeat 
a showing 
of a 
quantum 
of 
procedural 
unconscionability.50  There are numerous other factors, such as 
age and intelligence, that go to procedural unconscionability 
that are not present in the record.  However, no single factor 
is required to establish procedural unconscionability.  We are 
satisfied that the evidence on the record, even without some of 
the 
other 
factors 
mentioned 
in 
our 
cases, 
supports 
our 
conclusion that there was procedural unconscionability in the 
formation of the loan agreement.51  
B 
¶59 We now address whether the arbitration provision is 
substantively unconscionable.  Even if the arbitration provision 
is procedurally unconscionable, it may be enforced if it is not 
substantively 
unconscionable. 
Substantive 
unconscionability 
focuses on the one-sidedness, unfairness, unreasonableness, 
harshness, overreaching, or oppressiveness of the provision at 
issue.    
¶60 Substantive 
unconscionability 
has 
usually 
been 
successfully raised against commercial interests dealing with 
consumers, especially poor and disadvantaged consumers.52  In 
                                                 
50 See Pietroske, Inc., 275 Wis. 2d 444, ¶9 (treating fact 
that contract was written in "plain English" as a factor in 
determining no procedural unconscionability). 
51 See Discount Fabric House, 117 Wis. 2d at 602. 
52 1 Farnsworth, supra note 19, § 4.28, at 588-89; 1 White & 
Summers, supra note 20, § 4-2, at 210.  
No. 
2003AP2457   
 
31 
 
many of the cases in which a contract provision has been held to 
be 
substantively 
unconscionable, 
a 
creditor 
has 
unduly 
restricted a debtor's remedies or unduly expanded its own 
remedial rights.53  The instant case seems to be one in which the 
creditor has unduly restricted the debtor's remedies relative to 
those available to the creditor.  We begin our discussion of 
substantive unconscionability by analyzing the scope of the 
arbitration provision.    
¶61 The 
arbitration 
provision 
in the 
loan 
agreement 
broadly proclaims that any and all disputes, controversies, or 
claims between Wisconsin Auto Title Loans (or its employees or 
affiliates) and the borrower——whether pre-existing, present, or 
future——arising out of the loan agreement must be decided by 
binding arbitration.  A parenthetical phrase "save[s] and 
except[s]" from binding arbitration Wisconsin Auto Title Loans' 
"right to enforce the borrower's payment obligations in the 
event of default, by judicial or other process, including self-
help repossession." 
¶62 Wisconsin Auto Title Loans justifies this "save and 
except" parenthetical as necessary to comply with Wis. Stat. 
§§ 425.203, 425.205, and 425.206, which limit non-judicial 
enforcement of actions to take possession of collateral.  
Wisconsin Auto Title Loans argues that these statutes protect 
consumers, not lenders.  Thus, Wisconsin Auto Title Loans argues 
                                                 
53 1 White & Summers, supra note 20, § 4-4, at 217, § 4-6, 
at 223-29. 
No. 
2003AP2457   
 
32 
 
that the exception in the arbitration provision requiring that 
possession of collateral be taken in circuit court actually 
benefits 
the 
borrower. 
 
We 
are 
not 
convinced 
by 
this 
justification of the one-sided arbitration provision.  
¶63 The "save and except" parenthetical in the arbitration 
provision exempting Wisconsin Auto Title Loans from binding 
arbitration extends further than allowing Wisconsin Auto Title 
Loans to bring a replevin action in circuit court.  Not only may 
Wisconsin Auto Title Loans use a circuit court to replevy the 
loan collateral (the borrower's automobile), but the arbitration 
provision also allows Wisconsin Auto Title Loans to go to 
circuit court to enforce the borrower's payment obligations in 
the event of default. 
¶64 Wisconsin Auto Title Loans has by the arbitration 
provision "saved and excepted" from binding arbitration all its 
disputes, 
controversies, and 
claims 
against 
the 
borrower. 
Wisconsin Auto Title Loans could, under the exception to the 
arbitration 
provision, 
use 
a 
circuit 
court 
to 
obtain 
a 
deficiency judgment.  Wisconsin Auto Title Loans is also 
permitted by the exception to use any other procedure that a 
lender might pursue to satisfy the borrower's obligation under 
the loan agreement.  In contrast, the arbitration provision 
relegates all the borrower's claims to arbitration.  The 
borrower is required to submit all his disputes, controversies, 
and claims against Wisconsin Auto Title Loans to binding 
arbitration.     
No. 
2003AP2457   
 
33 
 
¶65 That Wisconsin Auto Title Loans has chosen to bring 
only a replevin action in the circuit court in the instant case 
is of no moment.  The issue is the substantive unconscionability 
of the arbitration provision, which "saves and excepts" all 
claims of Wisconsin Auto Title Loans from arbitration.   
¶66 The exception to the arbitration provision is far too 
broad and one-sided, granting Wisconsin Auto Title Loans a 
choice of forum——arbitration or the circuit court——for its 
claims, while permitting the borrower to raise claims only 
before 
an 
arbitrator. 
 
The 
doctrine 
of 
substantive 
unconscionability limits the extent to which a stronger party to 
a contract may impose arbitration on the weaker party without 
accepting the arbitration forum for itself.54   
¶67 Wisconsin Auto Title Loans contends that one-sidedness 
of the arbitration provision does not necessarily lead to the 
conclusion that the provision is unenforceable.  Several courts 
                                                 
54 Ting v. AT&T, 319 F.3d 1126, 1149 (9th Cir. 2003) 
(quoting Armendariz, 6 P.3d at 692)  ("'"Although parties are 
free to contract for asymmetrical remedies and arbitration 
clauses of varying scope . . . the doctrine of unconscionability 
limits the extent to which a stronger party may, through a 
contract of adhesion, impose the arbitration forum on the weaker 
party without accepting that forum for itself.'" (omission in 
Ting)). 
No. 
2003AP2457   
 
34 
 
have 
upheld 
one-sided 
arbitration 
provisions 
against 
unconscionability challenges.55     
¶68 While we appreciate that a one-sided arbitration 
provision may not be unconscionable under the facts of all 
cases, we conclude that the overly one-sidedness of the 
arbitration provision at issue in the instant case renders the 
arbitration provision substantively unconscionable.  Many courts 
have reached a similar conclusion of unconscionability when one-
                                                 
55 See, e.g., Harris v. Green Tree Fin. Corp., 183 F.3d 173, 
183-84 (3d Cir. 1999) (under Pennsylvania law, "the mere fact 
that Green Tree retains the option to litigate some issues in 
court, while the Harrises must arbitrate all claims does not 
make 
the 
arbitration 
agreement 
unenforceable" 
for 
unconscionability); Stenzel v. Dell, Inc., 870 A.2d 133, 143-45 
(Maine 2005) (under Texas law, entirely one-sided arbitration 
agreement 
that 
also 
prohibited 
class 
actions 
not 
unconscionable); Walther v. Sovereign Bank, 872 A.2d 735 (Md. 
2005) 
(arbitration 
provision 
in 
loan 
agreement 
not 
unconscionable, even though only the mortgagor was permitted to 
go to court, it prohibited class action claims, arbitration fees 
were not disclosed, and mortgagee was required to waive right to 
jury trial); Pridgen v. Green Tree Fin. Servicing Corp., 88 F. 
Supp. 2d 655, 658-59 (S.D. Miss. 2000) (under Mississippi law, 
an "arbitration clause is not unenforceable solely because it is 
one-sided."); Lackey v. Green Tree Fin. Corp., 498 S.E.2d 898, 
904-05 (S.C. Ct. App. 1998) (arbitration provision that carved 
out certain judicial proceedings for lender, but relegated 
counterclaims 
in 
those 
proceedings 
to 
arbitration 
not 
unconscionable). 
See cases cited at 1 Farnsworth, supra note 19, § 4.28, at 
592 n.49.   
No. 
2003AP2457   
 
35 
 
sided arbitration provisions require the weaker party to 
arbitrate.56   
                                                 
56 See, e.g., Iberia Credit Bureau, Inc. v. Cingular 
Wireless LLC, 379 F.3d 159, 169 (5th Cir. 2004) (arbitration 
provision requiring any claim customer is likely to bring be 
raised in arbitration while allowing cellular telephone provider 
to raise its claims against customer in court unconscionable 
under Louisiana law); Ferguson v. Countrywide Credit Indus., 
Inc., 
298 
F.3d 
778, 
784-86 
(9th 
Cir. 
2002) 
(holding 
unconscionable 
under 
California 
law 
employment 
contract 
compelling arbitration of claims employee most likely to bring 
against employer, but not claims employer most likely to bring 
against employee, and requiring first $125 of arbitration fees 
to be paid by employee); ACORN, 211 F. Supp. 2d at 1170-73 
(holding 
unconscionable 
under 
California 
law 
arbitration 
provision that prohibited class actions, required the result of 
the 
arbitration 
provision 
be 
confidential, 
and 
contained 
judicial carve-out only for party that drafted contract); E-Z 
Cash Advance, Inc. v. Harris, 60 S.W.3d 436, 441 (Ark. 2001) 
(arbitration provision in "payday loan" that retained judicial 
remedies for lender unconscionable because "[t]here is no 
mutuality of obligation where one party uses an arbitration 
agreement to shield itself from litigation, while reserving to 
itself the ability to pursue relief through the court system"); 
Flores v. Transamerica HomeFirst, Inc., 113 Cal. Rptr. 2d 376, 
854  (Cal. Ct. App. 2001) (holding unconscionable arbitration 
provision that applied to all claims brought by borrower in 
"reverse mortgage" contract, but not claims brought by the 
drafting party, the lender); Palm Beach Motor Cars Ltd., Inc. v. 
Jeffries, 885 So. 2d 990, 992 (Fla. Dist. Ct. App. 2004) 
(arbitration provision requiring purchaser of automobile to 
resolve all claims in arbitration but not requiring dealer to 
resolve any claims in arbitration unconscionable); Williams v. 
Aetna Fin. Co., 700 N.E.2d 859, 866 (Ohio 1998) (arbitration in 
consumer credit agreement that required all disputes "other than 
judicial foreclosures and cancellations regarding real estate 
security" to be resolved in arbitration and required non-
drafting borrower to pay arbitration fee unconscionable as to 
the borrower); Iwen v. U.S. West Direct, 977 P.2d 989, 995-96 
(Mont. 1999) (in contract between advertiser and phone book 
publisher, arbitration provision that required all claims be 
arbitrated "other than an action by Publisher for the collection 
of the amounts due under this Agreement" unconscionable because 
of the imbalance in the right to seek a judicial remedy); Lytle 
v. CitiFinancial Servs., Inc., 810 A.2d 643, 665 (Pa. Super. Ct. 
No. 
2003AP2457   
 
36 
 
¶69 The unconscionable one-sidedness of the arbitration 
provision is sufficient to hold the arbitration provision 
substantively unconscionable, and we so hold.  We should, 
however, comment that other factors compound the substantive 
unconscionability.   
¶70 Requiring 
the 
borrower 
to 
litigate 
similar 
or 
identical claims before both a circuit court and an arbitrator 
is burdensome on the borrower. Wisconsin Auto Title Loans 
concedes that, under the loan agreement, the borrower may bring 
any affirmative defenses to the replevin action in circuit 
court.  Thus, the borrower is permitted to argue before the 
circuit court that the replevin action cannot be sustained 
because the loan agreement is unconscionable.  However, if the 
borrower wishes to maintain a substantive cause of action based 
                                                                                                                                                             
2002) (holding that reservation by mortgagee of access to the 
courts for itself to the exclusion of mortgagor unconscionable 
absent any "business realities" compelling such a provision in 
arbitration agreement); Taylor v. Butler, 142 S.W.3d 277, 286 
(Tenn. 2004) (arbitration provision that provides "a judicial 
forum for practically all claims" that automobile dealer could 
have against purchaser but assigning any claims by the purchaser 
to arbitration unconscionable); Arnold v. United Cos. Lending 
Corp., 
511 
S.E.2d 
854, 
861-62 
(W.Va. 
1998) 
(holding 
unconscionable an arbitration provision in a consumer lending 
contract that "bind[s] the consumer to relinquish his or her 
right to a day in court and virtually all substantive rights, 
while the lender retains the right to a judicial forum for 
purposes of collection and foreclosure proceedings, deficiency 
judgments, and all other procedures which the lender may pursue 
to acquire title to the borrower's real or personal property."). 
See cases cited at 1 Farnsworth, supra note 19, § 4.28, at 
592 n.48. 
 
No. 
2003AP2457   
 
37 
 
on the same theory of unconscionability, the arbitration 
provision requires the borrower to bring such an action before 
an arbitrator.57   
¶71 The 
possibility 
of 
dual 
forums 
for 
intertwined 
defenses and counterclaims imposes an unnecessary and undue 
burden on the borrower; to redeem his property and also obtain a 
statutory remedy, he must litigate the same issue twice.  Yet 
Wisconsin Auto Title Loans need not litigate in two forums to 
vindicate its rights.  We agree with the court of appeals, which 
has stated: "[U]ncontemplated inconvenience . . . is a factor in 
deciding whether [a] clause is unconscionable."58   
¶72 Further supporting our conclusion that the broad one-
sided arbitration provision is substantively unconscionable is 
the fact that the provision "saves and excepts" a self-help 
remedy for Wisconsin Auto Title Loans.  Wisconsin Stat. 
§ 425.206 does not permit self-help repossession in the instant 
case; a judicial order is required.  Thus, the arbitration 
provision includes a remedy that is prohibited by statute.  
                                                 
57 See A.B.C.G. Enters., Inc. v. First Bank Se., N.A., 184 
Wis. 2d 465, 481-82, 515 N.W.2d 904 (1994) (requiring that 
counterclaims that arise as part of the same transaction and 
would defeat the plaintiffs' rights established as part of the 
initial action be brought in the same proceeding as the original 
claims). 
58 Leasefirst, 168 Wis. 2d at 90.  Dual-forum litigation is 
not only inconvenient but may raise difficult questions of issue 
and claim preclusion.  Manu-Tronics, Inc. v. Effective Mgmt. 
Sys., Inc., 163 Wis. 2d 304, 311, 471 N.W.2d 263 (Ct. App. 1991) 
(citing Dehnart v. Waukesha Brewing Co., 21 Wis. 2d 583, 589, 
124 N.W.2d 664 (1963), regarding claim preclusion (res judicata) 
and arbitration awards). 
No. 
2003AP2457   
 
38 
 
While this defect alone might not be enough to render the 
arbitration provision substantively unconscionable, it does 
support such a determination. 
¶73 Moreover, although the arbitration provision is silent 
on class actions, the parties assume the borrower must pursue 
his 
claims 
individually 
in 
arbitration 
and 
not 
as 
the 
representative of a class.59  Even if it were possible to pursue 
class claims in arbitration, and we do not address this issue, 
the relief available to the putative class appears to be 
substantially broader in circuit court than in arbitration.  
Under the Wisconsin Consumer Act, a class action may be 
maintained for injunctive relief.60  No such injunctive relief is 
                                                 
59 Courts have struck down arbitration provisions precluding 
class representation.  See cases cited at 1 Farnsworth, supra 
note 19, § 4.28, at 593 n.52. 
60 Wis. Stat. § 426.110(4)(e). 
No. 
2003AP2457   
 
39 
 
available in arbitration.  The arbitration provision, therefore, 
limits the meaningful remedies available to the borrower.61    
¶74 Finally, the arbitration provision requires that the 
borrower pay the first $125 of any filing fee for arbitration.  
This 
fee 
is 
apparently 
assessed 
without 
regard 
for 
the 
borrower's indigence at the time he files an arbitration action.  
Although a $125 filing fee alone is unlikely to result in a 
conclusion of substantive unconscionability, it is significant 
in the context of short-term high-interest loan agreements 
because the borrowers are, in all likelihood, strapped for cash.  
The arbitration fee supports our conclusion that the arbitration 
provision is substantively unconscionable.  Courts have held 
                                                 
61 Many other courts have found unconscionable express 
prohibitions on class actions claims.  See, e.g., Ting, 319 F.3d 
at 1150 (under California law, class action ban in contract of 
adhesion unconscionable); Comb v. PayPal, Inc., 218 F. Supp. 2d 
1165, 
1175-76 
(N.D. 
Cal. 
2002) 
(express 
prohibition 
on 
"consolidation 
of 
claims" 
in 
arbitration 
agreement 
unconscionable under California law); ACORN, 211 F. Supp. 2d at 
1170-71 (prohibition in arbitration provision on class wide 
relief unconscionable under California law); Leonard v. Terminix 
Int'l Co., L.P., 854 So.2d 529, 538-39 (Ala. 2002) (arbitration 
clause prohibiting class action unconscionable); Szetela v. 
Discover Bank, 118 Cal. Rptr. 2d 862, 866-68 (Cal. Ct. App. 
2002) (prohibition in arbitration provision on class wide relief 
unconscionable); State ex rel. Dunlap v. Berger, 567 S.E.2d 265, 
278-80 (W. Va. 2002) (exculpatory language in arbitration 
provision preventing class relief unconscionable).  But see 
Vernon v. Drexel Burnham & Co., 125 Cal. Rptr. 147 (Cal. Ct. 
App. 
1975) 
(under 
California 
law, 
upholding 
an 
implied 
prohibition on the "consolidation of claims" in arbitration 
provision). 
No. 
2003AP2457   
 
40 
 
that fee splitting in an arbitration provision renders the 
arbitration provision unconscionable.62 
¶75 We conclude that the broad, one-sided, unfair "save 
and except" parenthetical allowing Wisconsin Auto Title Loans 
full access to the courts, free of arbitration, while requiring 
the borrower to arbitrate, renders the arbitration provision 
substantively unconscionable.  Several other factors support 
this conclusion of law.  
¶76 We thus conclude, as did the circuit court and court 
of appeals, that the arbitration provision is both procedurally 
and substantively unconscionable.  We further conclude that 
there is a sufficient quantum of both procedural and substantive 
unconscionability to render the arbitration provision invalid. 
 
 
                                                 
62 Ting, 319 F.3d at 1151 (holding fee splitting provision 
of arbitration agreement unconscionable under California law); 
Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 894 (9th Cir. 
2002) (holding that an arbitration fee allocating scheme in an 
employment 
contract 
would, 
alone, 
render 
the 
arbitration 
provision unconscionable under California law); Shankle v. B-G 
Maint. Mgmt. of Colorado, Inc., 163 F.3d 1230, 1235 (10th Cir. 
1999) (invalidating fee splitting provision that would have 
required employee to pay $1875 of $6875 fee); Cole v. Burns 
Int'l Sec. Servs., 105 F.3d 1465, 1485 (D.C. Cir. 1997) 
(upholding fee splitting agreement in employment contract after 
construing agreement to require employer pay all of arbitrator's 
fees); Armendariz, 6 P.3d at 687 ("[T]he arbitration agreement 
or arbitration process cannot generally require the employee to 
bear any type of expense that the employee would not be required 
to bear if he or she were free to bring the action in court.").   
See cases cited at 1 Farnsworth, supra note 19, § 4.28, at 
593 n.51. 
No. 
2003AP2457   
 
41 
 
IV 
¶77 Finally, we turn to the question of whether the 
Federal Arbitration Act63 preempts state law that prohibits 
unconscionable arbitration provisions.  The Federal Arbitration 
Act simultaneously protects arbitration provisions in contracts 
evidencing a transaction involving commerce and the same time 
protects the historic role of state law in the formation and 
enforceability of contracts.  Thus § 2 of the Act provides that 
an arbitration provision may be unenforceable "upon such grounds 
as exist at law or in equity for the revocation of any 
contract."  The Act functions to preserve state contract law.  
¶78 Section 2 of the federal act states: 
A written provision in any maritime transaction or a 
contract evidencing a transaction involving commerce 
to settle by arbitration a controversy thereafter 
arising out of such contract or transaction, or the 
refusal to perform the whole or any part thereof, or 
an agreement in writing to submit to arbitration an 
existing controversy arising out of such a contract, 
transaction, or refusal, shall be valid, irrevocable, 
and enforceable, save upon such grounds as exist at 
law or in equity for the revocation of any contract.64    
¶79 Our application of state contract law to invalidate 
the arbitration provision at issue in the instant case is 
consistent with § 2 of the Federal Arbitration Act.  Indeed, the 
United 
States 
Supreme 
Court 
has 
expressly 
stated 
that 
                                                 
63 9 U.S.C. §§ 1-16 (2005). 
64 9 U.S.C. § 2 (2005) (emphasis added).   
The parties do not dispute that the Federal Arbitration Act 
applies to the transaction at issue in the instant case. 
No. 
2003AP2457   
 
42 
 
"[g]enerally applicable contract defenses, 
such 
as 
fraud, 
duress, or unconscionability, may be applied to invalidate 
arbitration agreements without contravening § 2 . . . ."65  Our 
contract 
law 
on 
unconscionability 
does 
not 
single 
out 
arbitration provisions.66  We therefore conclude that the Federal 
Arbitration Act does not preempt our unconscionability analysis.  
                                                 
65 Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 682 
(1996) (citing Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 
U.S. 265, 281 (1995)) (emphasis added). 
66 See, 
e.g., 
Doctor's 
Assocs., 
517 
U.S. 
at 
685-88 
("[C]ourts may not . . . invalidate arbitration agreements under 
state laws applicable only to arbitration provisions.  By 
enacting § 2 [of the FAA], Congress precluded States from 
singling 
out 
arbitration 
provisions 
for 
suspect 
status, 
requiring instead that such provisions be placed 'upon the same 
footing as other contracts.'" (emphasis in Doctor's Assocs.; 
internal citations omitted)); Allied-Bruce Terminix Cos., Inc. 
v. Dobson, 513 U.S. 265, 281 (1995) (quoting 9 U.S.C. § 2) 
("States may regulate contracts, including arbitration clauses, 
under general contract law principles and they may invalidate an 
arbitration clause 'upon such grounds as exist at law or in 
equity for the revocation of any contract.'" (emphasis in 
Allied-Bruce opinion)); Perry v. Thomas, 482 U.S. 483, 492 n.9 
(1987) ("[S]tate law, whether of legislative or judicial origin, 
is applicable if that law arose to govern issues concerning the 
validity, 
revocability, 
and 
enforceability 
of 
contracts 
generally.  A state-law principle that takes its meaning 
precisely from the fact that a contract to arbitrate is at issue 
does not comport with this requirement of § 2 [of the FAA]." 
(emphasis in Perry)); Southland Corp. v. Keating, 465 U.S. 1, 16 
n.11 (1984) (quoting 9 U.S.C. § 2) ("[A] party may assert 
general contract defenses such as fraud to avoid enforcement of 
an arbitration agreement.  We conclude, however, that the 
defense to arbitration found in the California Franchise 
Investment Law is not a ground that exists at law or in equity 
'for the revocation of any contract' but merely a ground that 
exists for the revocation of arbitration provisions in contracts 
subject to the California Franchise investment Law." (emphasis 
in Southland)). 
No. 
2003AP2457   
 
43 
 
¶80 Although 
we 
do 
not 
rest 
our 
conclusion 
of 
unconscionability on the effect of the arbitration provision on 
remedies under the Wisconsin Consumer Act (class actions and 
injunctive relief), we do comment that the borrower's alleged 
inability to exercise class action and injunctive rights and 
remedies under the Consumer Act supports our conclusion of 
unconscionability.   
¶81 Although the Wisconsin Consumer Act was not enacted to 
invalidate arbitration agreements, Wisconsin Auto Title Loans 
contends 
that 
the 
Federal 
Arbitration 
Act 
preempts 
an 
unconscionability analysis based on the provisions of the 
Wisconsin Consumer Act, because the Consumer Act is not a law of 
general applicability; the Consumer Act applies only to a subset 
of contracts.67  Wisconsin Auto Title Loans also argues that the 
Consumer Act remedies such as class-wide injunctive relief must 
be preempted because, to the extent that they require judicial 
resolution, they are effectively no more than a ground to 
invalidate an arbitration provision.     
¶82 Amici curiae University of Wisconsin Law Professors 
argue, on the contrary, that the Federal Arbitration Act 
preempts only those laws that target arbitration specifically 
while preserving through the savings clause state laws affecting 
                                                 
67 Wisconsin Auto Title Loans directs our attention to 
Bradley v. Harris Research, Inc., 275 F.3d 884 (9th Cir. 2001), 
involving a provision in the California Business and Professions 
Code prohibiting franchise agreements from restricting venue of 
litigation 
under 
such 
agreements 
to 
a 
forum 
outside 
of 
California. 
No. 
2003AP2457   
 
44 
 
contracts.  In other words, amici contend that the Federal 
Arbitration Act savings clause exempts from preemption a state 
statute governing contracts generally that does not specifically 
target arbitration provisions, even those statutes applicable to 
a subset of contracts.  Thus, a state statute that regulates 
consumer contracts but does not specifically target arbitration 
provisions would, under their argument, be valid.  Citing to the 
Uniform Commercial Code and statutory regulation of contracts of 
financial institutions, car dealers, and insurance companies, 
for example, the Professors argue that most contract law is 
subject-specific 
and 
that 
Wisconsin 
Auto 
Title 
Loans' 
distinction between general contract defenses and the Consumer 
Act is illusory and untenable and has no place in Federal 
Arbitration Act jurisprudence.  
¶83 Amici find support for their position in a footnote in 
the United States Supreme Court opinion in Perry v. Thomas, 482 
U.S. 483 (1987), in which the Court stated: 
Thus state law, whether of legislative or judicial 
origin, is applicable if that law arose to govern 
issues concerning the validity, revocability, and 
enforceability of contracts generally. A state-law 
principle that takes its meaning precisely from the 
fact that a contract to arbitrate is at issue does not 
comport with this requirement of § 2 [of the Federal 
Arbitration Act].68 
¶84 The quoted language from Perry strongly suggests that 
the Wisconsin Consumer Act would not be preempted were the U.S. 
Supreme Court to address the issue.      
                                                 
68 Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987). 
No. 
2003AP2457   
 
45 
 
¶85 We need not and do not decide this preemption issue in 
the instant case.  As we discuss above, we conclude that the 
arbitration provision is unconscionable even if it did not 
foreclose class claims or injunctive relief under the Wisconsin 
Consumer Act. 
*  *  *  * 
¶86 In sum, we hold that the arbitration provision of the 
loan agreement between Wisconsin Auto Title Loans and the 
borrower is unconscionable.   
¶87 The following factors render the arbitration provision 
procedurally unconscionable: Wisconsin Auto Title Loans was in 
the business of providing loans with automobile title as 
collateral and was experienced in drafting such loan agreements; 
Wisconsin Auto Title Loans was in a position of substantially 
greater bargaining power than the borrower; the borrower was 
indigent and in need of cash; and the loan agreement was an 
adhesion contract presented to the borrower on a take-it-or-
leave-it basis. 
¶88 The 
broad, 
one-sided, 
unfair 
"save 
and 
except" 
parenthetical in the arbitration provision allowing Wisconsin 
Auto Title Loans full access to the courts, free of arbitration, 
while 
limiting 
the 
borrower 
to 
arbitration 
renders 
the 
arbitration 
provision 
substantively 
unconscionable. 
 
Other 
factors support this conclusion of law. 
¶89 Thus a sufficient quantum of both procedural and 
substantive unconscionability exists to render the arbitration 
provision invalid.  We therefore remand the matter to the 
No. 
2003AP2457   
 
46 
 
circuit court for further proceedings on Wisconsin Auto Title 
Loans' 
replevin 
action 
and 
the 
borrower's 
answer 
and 
counterclaims. 
¶90 By the Court.—The decision of the court of appeals is 
affirmed.  
 
 
No. 
2003AP2457.lbb   
 
 
 
1
¶91 LOUIS B. BUTLER, JR., J.   (concurring).  I join the 
opinion and mandate of the court.  I write separately to add 
that which needs be said: charging 300 percent interest for a 
short-term loan to those who can ill-afford it is ridiculous, 
unreasonable, and unconscionable.  Wisconsin citizens deserve 
better. 
¶92 Proponents of companies that provide auto title loans 
insist that the companies are providing a necessary service and 
taking on a risk that no other lender will take on.  They assert 
that if they did not provide these loans, substantial numbers of 
people will be unable to obtain a loan.  They also assert that 
the high interest rate is the only way they can afford to take 
the risk.  These lenders claim they are the only option for 
debt-strapped consumers. 
¶93 While these lenders may be the only option for debt-
strapped consumers, they are not a reasonable option.  Auto 
title loans are so expensive that they drive many people deeper 
into debt.  In addition, auto title loans are secured by the 
consumer's automobile or truck.  Lenders often, as the lender 
did in this case, actually keep an extra set of keys to the 
vehicle——and may take possession of a vehicle if a borrower is 
delinquent in making one payment.  If a payment is missed, the 
lender can start the process of taking the borrower's vehicle, 
resulting in a loss of transportation to work and to obtain 
health care. 
¶94 Predatory 
lenders 
exploit 
borrowers 
through 
excessively high interest rates.  Consumers who must borrow 
No. 
2003AP2457.lbb   
 
 
 
2
money this way are usually in desperate debt.  These lenders 
target low-income consumers, individuals with stained credit 
scores, and those in society who cannot access traditional 
sources of money and credit.  The high rates that predatory 
lenders charge make it difficult for borrowers to repay the 
loan, resulting in many consumers being driven onto a perpetual 
debt treadmill.  Essentially, the predatory lender sets the 
borrower up to fail. 
¶95 We have held that a sufficient quantum of both 
procedural and substantive unconscionability exists to render 
the arbitration proceeding in this case invalid, and remanded 
the matter to the circuit court for further proceedings on 
Wisconsin Auto Title Loans' replevin action and the borrower's 
answer and counterclaims.  Nevertheless, the legislature can put 
an end to this practice in future cases by capping auto title 
loans at an annual percentage rate it determines to be 
reasonable.  Anything less short-changes the public.  I urge the 
legislature to act now to protect the citizens of this great 
state. 
¶96 For the foregoing reasons, I respectfully concur.    
¶97 I am authorized to state that Justice N. PATRICK 
CROOKS joins this concurrence.   
No.  2003AP2457.pdr 
 
1 
 
¶98 PATIENCE DRAKE ROGGENSACK, J.  (dissenting).   I agree 
with the majority opinion's statement of the rule of law that is 
employed when a court determines whether a contract provision is 
unconscionable.  Majority op., ¶¶29, 30.  I agree that both 
procedural and substantive unconscionability must be present 
before a clause will be held to be unenforceable.  Id., ¶29.  I 
also agree with the majority opinion's conclusion that the 
arbitration clause in the contract between Wisconsin Auto Title 
Loans and Kenneth Jones is substantively unconscionable, as a 
matter of law.  Id., ¶69.  I write separately because I conclude 
that there are not sufficient facts of record to support the 
majority opinion's conclusion that the arbitration provision of 
the contract is procedurally unconscionable.  Therefore, I would 
reverse the court of appeals decision and remand to the circuit 
court for arbitration of the counterclaims.  I also would allow 
the circuit court to consider whether to stay the replevin 
action until the arbitration is complete.  Accordingly, I 
respectfully dissent from the majority opinion. 
I.  BACKGROUND 
¶99 There was no evidentiary hearing before the circuit 
court and no affidavits were filed by the parties relative to 
procedural unconscionability.  In regard to the potential 
sources for facts, the record contains a complaint1 seeking 
replevin of Jones's automobile based on his alleged default on 
the loan repayment obligation; an affidavit showing an inability 
                                                 
1 Copies of portions of the loan documents and the notice of 
default are attached to the complaint. 
No.  2003AP2457.pdr 
 
2 
 
to personally serve Jones; proof of service by publication; an 
answer 
that 
denied 
default; 
counterclaims 
asserting 
that 
Wisconsin Auto Title Loans deliberately concealed loan costs, 
that Jones was unemployed and in need of cash for personal and 
household needs, that Jones's only income at the time he took 
out the loan came from unemployment benefits, that the loan form 
Jones signed was a preprinted, non-negotiable, standardized 
contract, that Jones did not have "meaningful access to 
traditional credit resources, or conventional consumer loans"; a 
notice of motion and motion to compel Jones to arbitrate the 
issues 
raised 
by 
his 
counterclaims, 
while 
staying 
the 
counterclaims but not the replevin action; a petition for waiver 
of filing and service fees for the counterclaims as well as the 
jury fees; an order granting the waiver of fees based on Jones's 
indigence; 
amended 
counterclaims 
with 
the 
same 
factual 
allegations; an objection to the arbitration clause as being 
unconscionable; a notice of motion and motion to limit the 
issues before the circuit court "to the single question of 
whether 
the 
issues 
raised 
in 
defendant's 
answer 
and 
counterclaims are subject to arbitration rather than judicial 
process"; the recitation of an agreement between the parties 
that no reply to the counterclaims would be due until the court 
decided the pending motions; and the circuit court order 
concluding that the arbitration provision is unconscionable.   
¶100 None of the factual allegations in the counterclaims 
was admitted.  However, notwithstanding the lack of such 
admissions and the failure to hold an evidentiary hearing, the 
No.  2003AP2457.pdr 
 
3 
 
circuit court concluded that the arbitration provision was 
procedurally unconscionable because: 
The plaintiff is experienced in the business of 
supplying auto loans, drafting agreements, was in a 
position 
of 
greater 
bargaining 
power 
than 
the 
defendant.  The agreement was presented to defendant 
in a take it or leave it manner, and the terms of the 
arbitration agreement 
were not 
explained 
to the 
defendant. 
The court of appeals affirmed that decision.  Wis. Auto Title 
Loans, Inc. v. Jones, 2005 WI App 86, ¶1, 280 Wis. 2d 823, 696 
N.W.2d 214.  The majority opinion affirms the court of appeals.  
Majority op., ¶9. 
II.  DISCUSSION 
A. 
Standard of Review 
¶101 Whether a contract clause is unconscionable is a 
question of law.  First Fed. Fin. Serv., Inc. v. Derrington's 
Chevron, Inc., 230 Wis. 2d 553, 559, 602 N.W.2d 144 (Ct. App. 
1999). 
 
"However, 
because 
the 
elements 
of 
procedural 
unconscionability are so intertwined with the factual findings, 
we give weight to the [circuit] court's conclusions on that 
prong."  Id.  We will uphold a circuit court's findings of fact 
unless they are not supported by the record, in which case those 
findings are clearly erroneous.  Schreiber v. Physicians Ins. 
Co. of Wis., 223 Wis. 2d 417, 426, 588 N.W.2d 26 (1999). 
B. 
Procedural Unconscionability 
¶102 Procedural 
unconscionability 
occurs 
when 
the 
contracting parties have not had a true meeting of the minds.  
Leasefirst v. Hartford Rexall Drugs, Inc., 168 Wis. 2d 83, 89-
90, 
483 
N.W.2d 
585 
(Ct. 
App. 
1992). 
 
Procedural 
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unconscionability has also been described as arising from "the 
process of the parties' assent to contract."  Kohler Co. v. 
Wixen, 204 Wis. 2d 327, 340, 555 N.W.2d 640 (Ct. App. 1996).  
¶103 Facts that are relevant to the issue of procedural 
unconscionability are the "age, intelligence, business acumen, 
business experience and relative bargaining power of the 
parties."  Id. (citation omitted).  Courts have also considered 
the print size of the contractual provision under consideration; 
whether the provision was disclosed and explained; whether all 
the 
parties 
to 
the 
contract 
were 
disclosed 
and 
their 
relationship to one another explained; and whether both parties 
had a sufficient opportunity to read the contract.  Leasefirst, 
168 Wis. 2d at 90.  Whether alterations in the terms of the 
contract were possible and whether there was any alternate 
source for the item for which the contract was made are relevant 
facts, as well.  Disc. Fabric House of Racine, Inc. v. Wis. Tel. 
Co., 117 Wis. 2d 587, 602, 345 N.W.2d 417 (1984) (citations 
omitted). 
¶104 "[A]n evidentiary hearing is required to enable the 
court to make the necessary findings of fact to support a 
conclusion 
that 
a 
[contract] 
clause 
is 
unconscionable."  
Datronic Rental Corp. v. DeSol, Inc., 164 Wis. 2d 289, 294, 474 
N.W.2d 780 (Ct. App. 1991).  This is so because procedural 
unconscionability is a fact-driven determination that cannot be 
No.  2003AP2457.pdr 
 
5 
 
ascertained solely from the written contract.2  Kohler, 204 
Wis. 2d at 340.  The burden of proof is on the person claiming 
that the contract clause is unconscionable to prove facts 
sufficient to support that contention.  Wassenaar v. Panos, 111 
Wis. 2d 518, 526, 331 N.W.2d 357 (1983).   
¶105 Jones had the burden of proof to develop facts 
sufficient to support the legal conclusion that the arbitration 
clause was unconscionable.  Id.  The court of appeals noted that 
there was no evidentiary hearing to support the necessary facts, 
but concluded that the circuit court made factual findings, 
"apparently based on the record and representations made by the 
attorneys at oral argument."  Wis. Auto Title Loans, 280 Wis. 2d 
823, ¶17.  The court of appeals then decided that Wisconsin Auto 
Title Loans "waived its objections" to the circuit court's 
having made factual findings in this manner.  Id.  In so doing, 
the court of appeals shifted the burden of proof from Jones to 
Wisconsin Auto Title Loans and permitted the circuit court to 
avoid its obligation as the fact-finder for the issues now 
before us on review.  
¶106 The facts upon which the circuit court relied were not 
uncontested facts.  The facts upon which the circuit court 
relied were not stipulated facts.  The facts upon which the 
circuit court relied were not admitted by the pleadings.  The 
                                                 
2 Because 
substantive 
unconscionability 
addresses 
the 
reasonableness of the contract terms to which the parties 
agreed, it often can be determined from the face of the 
contract.  Kohler Co. v. Wixen, 204 Wis. 2d 327, 340-41, 555 
N.W.2d 640 (Ct. App. 1996). 
No.  2003AP2457.pdr 
 
6 
 
facts upon which the circuit court relied were not developed in 
an evidentiary hearing.  Nonetheless, the circuit court made 
findings of fact in regard to procedural unconscionability.  
Because the facts employed by the circuit court were not 
uncontested facts, or stipulated facts, or facts admitted by the 
pleadings, or facts developed through an evidentiary hearing, 
they are clearly erroneous.  Schreiber, 223 Wis. 2d at 426.   
¶107 The majority opinion provides a detailed justification 
for its reliance on the circuit court's inferences, along with 
its own inferences from the record, to support its conclusion of 
procedural unconscionability.  Majority op., ¶¶41-52.  We have 
previously held that "it is impermissible to base a judgment on 
'conjecture, unproved assumptions, or mere possibilities.'"  
Merco Distrib. Corp. v. Commercial Police Alarm Co., 84 Wis. 2d 
455, 461, 267 N.W.2d 652 (1978).  We have also held that 
arguments of counsel are an insufficient foundation for fact 
finding.  Dane County v. McManus, 55 Wis. 2d 413, 425-26, 198 
N.W.2d 667 (1972).  Notwithstanding years of precedent in this 
regard, that is exactly what the circuit court, the court of 
appeals and this court have done.   
¶108 The record does not contain undisputed facts regarding 
any of the following considerations:  real and voluntary meeting 
of the minds; Jones's age, education or intelligence; whether 
the terms were explained to him; whether alterations in the 
printed terms were possible; and whether Jones could have gotten 
a loan elsewhere.  We do not know whether Jones previously had 
taken loans from Wisconsin Auto Title Loans, or from a similar 
No.  2003AP2457.pdr 
 
7 
 
lender.  Therefore, contrary to the majority opinion, we do not 
know his level of "sophistication"3 relative to a transaction of 
this type.   
¶109 The borrower's financial circumstances at the time 
when the loan was made are relevant to determining procedural 
unconscionability.  Disc. Fabric, 117 Wis. 2d at 601.  However, 
we do not know what Jones's financial circumstances were when 
the loan was made.  The majority opinion infers that he was 
indigent then because he was indigent six months later.  
Majority op., ¶50.  While that may be true, it is not the only 
inference that may be made from the record.  The majority 
opinion also infers that because Jones took this loan after 
being advised that the interest rate was 300% per year and that 
if he could borrow at a lower rate he should do so, he had no 
other alternative but to borrow from Wisconsin Auto Title Loans.  
Id.  Again, while this may be true, it may also be true that 
Jones never looked for another lender.  It may also be true that 
Jones would have been better served if he had taken no loan at 
all from any lender.  And finally, the majority opinion finds 
that the loan agreement was presented to Jones on a "take-it-or-
leave-it" basis.  Majority op., ¶52.  This is not an undisputed 
fact.  There is no testimony about any of the circumstances that 
surrounded the making of the loan.   
¶110 The majority opinion does note that the circuit 
court's finding that the borrower was unemployed and needed 
funds for household expenses is not supported by evidence in the 
                                                 
3 See majority op., ¶49. 
No.  2003AP2457.pdr 
 
8 
 
record and cannot be reasonably inferred.  Majority op., ¶54.  
It makes the same conclusion about the circuit court's finding 
that the terms of the agreement were not explained to Jones.  
Majority op., ¶55.  I agree with the majority that the record 
contains no support for those findings.  However, I also point 
out that a court may make factual inferences only when the basic 
facts are first found or are undisputed.  It is that initial 
step that is missing here. 
¶111 We have long-standing rules that guide the circuit 
court, the court of appeals and our own decisions in regard to 
which court is to make factual findings and how that is to 
occur.  Datronic, 164 Wis. 2d at 294 (concluding that an 
evidentiary 
hearing 
is 
required 
before 
the 
issue 
of 
unconscionability can be decided); McManus, 55 Wis. 2d at 425-26 
(concluding that oral representations of counsel are not a 
sufficient basis on which to base facts needed for a circuit 
court finding or a supreme court's decision); Wis. State 
Employees Union v. Henderson, 106 Wis. 2d 498, 501-02, 317 
N.W.2d 170 (Ct. App. 1982) (concluding that the court of appeals 
is without jurisdiction to make factual findings); Schreiber, 
223 Wis. 2d at 426 (concluding that facts found without a record 
to support them are clearly erroneous).   
¶112 Although it is easy to understand the emotional tug 
that Jones's claims exert on the courts, employing consistent 
procedures in each case protects against arbitrary decision 
making in all cases.  Because I conclude that the rules of 
No.  2003AP2457.pdr 
 
9 
 
evidence 
were 
not 
applied 
in 
accord 
with 
long-standing 
precedent, I would reverse the decision of the court of appeals.  
III.  CONCLUSION 
¶113 I conclude that there are not sufficient facts of 
record to support the majority opinion's conclusion that the 
arbitration 
provision 
of 
the 
contract 
is 
procedurally 
unconscionable.  Therefore, I would reverse the court of appeals 
decision and remand to the circuit court for arbitration of the 
counterclaims.  I also would allow the circuit court to consider 
whether to stay the replevin action until the arbitration is 
complete.  Accordingly, I respectfully dissent from the majority 
opinion. 
¶114 I am authorized to state that Justice JON P. WILCOX 
joins this dissent. 
 
 
 
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