Opinion ID: 2008036
Heading Depth: 1
Heading Rank: 5

Heading: Subsequent Revision of Service Agreement

Text: As a threshold matter, we address Cingular's argument that the terms of its current standard service agreement should be applied to plaintiff's claim, notwithstanding her lack of consent to be bound by such terms. At this stage of our analysis, we need not be concerned with the strong federal policy favoring arbitration, as we are not yet considering whether an arbitration clause is enforceable. The question at this stage is which of the two arbitration provisionsthe one printed on the back of the form plaintiff signed in 2001, or the one adopted by Cingular in 2003should be the subject of the court's inquiry. Neither party has suggested the proper standard of review. Because the question is, in essence, one of contract modification, we look to the law of contracts. Where the evidence is in conflict, whether an existing contract has been modified is a question of fact. 12A Ill. L. & Prac. § 347, at 199 (1983). However, where the evidence is undisputed, it is for the court to decide whether a modification has been effected. 12A Ill. L. & Prac. § 347, Comment, at 199 (1983). The evidence in the present case is undisputed. We, therefore, review de novo the question of the applicability of the revised arbitration provision to plaintiff's claim. Cingular devoted a significant portion of its brief and oral argument to its offer to bear the full cost of arbitration and to reimburse plaintiff for her attorney fees if she were to prevail in arbitration. Cingular asserts that the appellate court erred by refusing to focus on its revised arbitration clause, which it characterizes as a consumer-friendly provision that waives the earlier cost-sharing requirement. Cingular cites Ellman v. Ianni, 21 Ill.App.2d 353, 361, 157 N.E.2d 807 (1959), for the proposition that a condition or provision of the contract may, generally, be waived by the party thereto who is entitled to receive the benefit of the condition. In addition, Cingular argues that offers to pay the costs of arbitration should be credited when considering whether an arbitration provision is enforceable, citing Livingston v. Associates Finance, Inc., 339 F.3d 553, 557 (7th Cir.2003). In Livingston, the court of appeals found that a provision in the arbitration agreement, under which the company offered to pay arbitration fees if the customer was financially incapable of paying, was sufficient to protect the customer from potentially prohibitive costs. Thus, the court concluded, the bare assertion of prohibitive costs, without more, is too speculative and insufficient to shift the burden to the company to show that the costs of arbitration are not prohibitive. Livingston is readily distinguishable from the present case because the defendant's offer to pay the costs of arbitration was part of the initial agreement that the customer signed. In the present case, the offer was not made until after the customer filed a lawsuit. Cingular has also been permitted to file supplemental authority in support of its claim that the revised service agreement should be applied to plaintiff's claim. In Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir.2006), the court of appeals held an arbitration provision added to the defendant's standard service agreement in 2002-03 applied retroactively to the plaintiffs' claims that arose during the period 1987-2001. When the plaintiffs first subscribed for cable services from Comcast, their service agreements did not contain arbitration provisions. It appears, however, that all four plaintiffs continued to subscribe to Comcast services after the arbitration provision was added to the standard service agreement and were, therefore, subject to the revised terms. Kristian, 446 F.3d at 30. Kristian is distinguishable on this basis. Plaintiff was not a Cingular customer on or after the date upon which Cingular amended its service agreement. Plaintiff responds that Cingular should not be allowed to make unilateral post facto amendments to its contract to improve its litigation position in this case, and distinguishes Ellman based on the difference between a party's waiving a term of the original contract and changing the terms of that contract. We agree that the offer made by Cingular to plaintiff is not a mere waiver of a contractual right (the right to have plaintiff pay a portion of the cost of arbitration), but is a substantial modification of the parties' contract, including an affirmative promise to pay plaintiff's attorney fees and costs if she were to prevail in arbitration, as well as other new terms. Plaintiffs also rely on Morrison v. Circuit City Stores, Inc., 317 F.3d 646, 676 (6th Cir.2003), in which the court of appeals rejected the defendant-employer's argument that the plaintiff-employee should be compelled to arbitrate his discrimination claim because it had agreed, in writing, to pay his share of the arbitration fee. In considering the ability of plaintiffs to pay arbitration costs under an arbitration agreement, reviewing courts should not consider after-the-fact offers by employers to pay the plaintiff's share of arbitration costs where the agreement itself provides that the plaintiff is liable, at least potentially, for arbitration fees and costs. Morrison, 317 F.3d at 676. Cingular responds that, unlike the defendant in Morrison, it has changed its standard service agreement so that all customers, not just this plaintiff, will be spared the costs of arbitration if they have meritorious claims. Thus, Cingular claims, any claim by plaintiff or any current or former customer that its arbitration provision is unconscionable on the basis of the prohibitive cost of arbitration is moot. We conclude, for two reasons, that the original arbitration clause should be the focus of the unconscionability analysis. First, we agree with the reasoning of Morrison and Spinetti that a defendant's after-the-fact offer to pay the costs of arbitration should not be allowed to preclude consideration of whether the original arbitration clause is unconscionable. As the Morrison court noted, the party who drafted the provision is saddled with the consequences of the provision as drafted.  (Emphasis in original.) Morrison, 317 F.3d at 677. We find this reasoning equally applicable whether the defendant alters its arbitration clause with respect to all current contracts, or makes a private, individual offer to the plaintiff in a particular case. Second, this result is consistent with the law of contracts regarding modification. In the service agreement signed by plaintiff, Cingular expressly reserved the right to unilaterally modify the terms and conditions of the agreement, at any time, without notice. Plaintiff accepted this condition. Plaintiff terminated her contractual relationship with Cingular in April 2002, when, in full compliance with the then-existing agreement, she cancelled her cellular telephone service and paid the early-termination fee. Cingular subsequently modified the arbitration provision of its standard service agreement. When Cingular revised the arbitration provision, however, the contract between Cingular and plaintiff was no longer in effect. Cingular did not have the right to unilaterally modify the terms of a contract that had been terminated many months prior to the attempted modification. Plaintiff could certainly have accepted Cingular's offer to extend the new terms to her, but Cingular cannot compel her to do so. In response to Cingular's argument that the strong federal interest in enforcement of arbitration agreements weighs in favor of applying its new arbitration provision to plaintiff's claim, we note that, in deciding whether to give effect to an attempted contract modification, the analysis does not depend on the nature of the contractual provision at issue. One party to a contract may not unilaterally modify a contract termwhether it is an arbitration clause, a disclaimer of incidental and consequential damages, a liquidated damages clause, or any other term after the contractual relationship between the parties has ended and the original contract is the subject of a dispute. Defendant's revision of the arbitration provision in existing service agreements is, therefore, irrelevant to the instant case because this new provision was never a part of the contract between the parties.