Opinion ID: 2543212
Heading Depth: 2
Heading Rank: 3

Heading: Defenses to Contract Formation

Text: Unlike Concepcion, which concerned the enforceability of a class waiver, the issue in this case is whether the arbitration agreement as a whole is unconscionable. [3] The purpose of the unconscionability doctrine is to guard against one-sided contracts, oppression and unfair surprise. Cowbell, LLC v. Borc Building and Leasing Corp., 328 S.W.3d 399, 405 (Mo.App.2010); see also Woods, 280 S.W.3d at 96. Oppression and unfair surprise can occur during the bargaining process or may become evident later, when a dispute or other circumstances invoke the objectively unreasonable terms. In either case, the unconscionability is linked inextricably with the process of contract formation because it is at formation that a party is required to agree to the objectively unreasonable terms. The evidence in this case supports a determination that the agreement's arbitration clause is unconscionable. There was evidence that the entire agreement including the arbitration clausewas non-negotiable and was difficult for the average consumer to understand and that the title company was in a superior bargaining position. Brewer could not negotiate the terms of the agreement, including the terms of the arbitration clause. Indeed, the evidence further demonstrated that no consumer ever successfully had renegotiated the terms of the title company's arbitration contract. The evidence also demonstrated that the terms of the agreement are extremely one-sided. Unlike in Concepcion, in which AT & T shouldered the costs of arbitration and would pay double the customer's attorney's fees if the customer recovered more than AT & T had offered prior to arbitration, the agreement here provides that the parties are to bear their own costs. In Concepcion, the arbitration clause waived AT & T's right to seek reimbursement for attorney's fees incurred in defending against a consumer's claim. In contrast, the title company did not waive its right to seek attorney's fees and, therefore, could seek to recover attorney's fees incurred in defending a claim. The fact that no consumer ever has arbitrated a claim against the title company under these terms makes it clear that the agreement stands as a substantial obstacle not just to arbitration but also to the resolution of any consumer disputes against the title company. The evidence in this case is also fundamentally different from that in Concepcion because Brewer presented expert testimony from three consumer lawyers who testified it was unlikely that a consumer could retain counsel to pursue individual claims. There was no such record in Concepcion. A claim such as Brewer's would require significant expertise and discovery, and it would not be financially viable for an attorney because of the complicated nature of the case and the small damages at issue. The title company presented no contrary evidence from attorneys who said they were willing to take such cases other than on a pro-bono or rare voluntary basis. While the majority opinion in Concepcion makes it clear that the unavailability of counsel is not alone sufficient to invalidate the requirement of individual arbitration, it remains one of the relevant considerations in assessing the overall conscionability of an arbitration contract. The Discover Bank rule was not preempted because it conditioned the enforceability of an arbitration contract on the availability of an attorney. Instead, the critical flaw leading to the preemption of the Discover Bank rule was that it required class arbitration even if class arbitration disadvantaged consumers and was unnecessary for the consumer to obtain a remedy. Discover Bank, therefore, was inconsistent with the core purpose of the federal act, which is to ensure enforcement of private arbitration agreements to promote informal, efficient dispute resolution. Concepcion, 131 S.Ct. at 1748-1749. Because the purpose of the act is to ensure efficient dispute resolution, the analysis in Concepcion assumes the availability of a practical, viable means of individualized dispute resolution through arbitration. In some cases, the availability of counsel is a relevant consideration for determining whether the act's interest in dispute resolution will be satisfied. As noted above, the totality of Brewer's evidence, including the lack of available counsel, demonstrates that there is no practical, viable means of individualized dispute resolution. The title company asserts that the availability of attorney's fees and punitive damages under the state merchandising practices act negates Brewer's argument that attorneys are unwilling to handle claims such as hers. The title company notes that reported cases indicate that some lawyers are willing to handle cases brought under the federal truth in lending and fair debt collection practices acts and that this proves that statutory damages provide sufficient financial incentive for attorneys to assist consumers in individual, small dollar claims. The deficiency in the title company's argument is that it presents a totally theoretical position that attorneys should want to take such cases. Speculation is not a substitute for evidence. In this case, there was specific and uncontradicted evidence before the trial court demonstrating that attorneys were unlikely to take claims such as Brewer's on an individual basis. Even if some attorneys may take some cases because of the potential availability of fees under the merchandising practices act, this does not prove that Brewer would have the benefit of counsel in attempting to obtain a remedy on an individual basis. Finally, the agreement does not bilaterally provide that any and all disputes between the parties arising out of or related to the agreement must be decided by binding, individual arbitration under the federal act. Instead, the title company drafted the agreement to bind the consumer to individual arbitration for all claims against the title company, but it specifically reserved its right to forego arbitration to seek possession of the Collateral in the event of default by judicial or other process including self-help repossession. In the context of a title loan transaction, this is a particularly onerous provision because among the lender's chief remedies in the event of default is either judicial or self-help repossession. The title company reserves its right to obtain its primary remedies through the court system while requiring Brewer to obtain her only meaningful remedymonetary compensation for the alleged violation of consumer protection lawsthrough individual arbitration. [4] The disparity in bargaining power, in addition to the disparity between Brewer's remedial options and the title company's remedial options, constitutes strong evidence that the agreement is unconscionable. The title company requires Brewer to arbitrate all of her claims in the interests of efficient, streamlined dispute resolution. However, when the title company's interests are at stake, the title company is free to discard the efficiencies of arbitration in favor of litigating a claim against Brewer. It is unlikely that the ramifications of such provisions are comprehended by the average consumer or comport with the reasonable expectations of an average member of the public. The arbitration contract at issue in Concepcion is fundamentally different from the agreement in this case. In Concepcion, the contract provided an informal 30-day dispute resolution procedure. Id. at 1744. If the consumer was dissatisfied, he or she could seek arbitration by filling out a form provided on AT & T's website. Id. AT & T would pay all costs of arbitration of any non-frivolous claim. Id. Arbitration would occur in the customer's home county and could be by telephone, in person or on paper for small claims. Id. AT & T never could seek attorney's fees, while the consumer was entitled to double fees if awarded more than AT & T's last offer. Id. Customers who utilized the opportunity to resolve their claims either informally or through this arbitration process, were essentially guarantee[d] to be made whole. Id. at 1753, citing Laster v. AT & T Mobility, LLC, 584 F.3d 849 856, n. 9 (9th Cir.2009). In contrast, the agreement at issue in this case does not provide for informal complaint resolution. Arbitration is required for any dispute, at the cost of the customer, while the title company has a choice of simply repossessing the collateral by force or through suit in court rather than using arbitration. The title company never pays the costs of arbitration or attorney's fees for the customer, even if the customer wins. The obstacle to dispute resolution posed by these provisions is illustrated by the simple fact that no customer has utilized the arbitration clause to recover. As arbitration is the only remedy, this means that no customer has obtained relief. As a result, far from fulfilling the purpose of the federal act of providing a prompt and informal method of resolving disputes, the arbitration clause here is itself an obstacle to the accomplishment of the act's objectives. For these reasons, this Court finds that the unconscionable aspects of the agreement indicate that it is a contract that no person in his senses and not under delusion would make. Concepcion, 131 S.Ct. at 1755 (Thomas, J. concurring)(citing Hume v. United States, 132 U.S. 406, 411, 10 S.Ct. 134, 33 L.Ed. 393 (1889)). Brewer has established, therefore, that the circumstances under which the agreement was made are unconscionable. The arbitration clause of the agreement is unconscionable and unenforceable.