Opinion ID: 169554
Heading Depth: 2
Heading Rank: 2

Heading: The Growers' Unconscionability Claim

Text: The Growers claim that the broiler contract is unconscionable because of the gross imbalance of obligation borne by growers. For example, they point to the fact that the contract guarantees only a single flock of chicks although a grower must raise broilers for at least fifteen years to recoup its investment. They also note that OK is not obligated to place a minimum number of chicks or flocks with each grower, and growers are obligated to make improvements to chicken houses before OK will place additional flocks with them. We must first address a threshold choice-of-law question. Beginning in 1997, OK's broiler contracts included a choice-of-law provision, designating the law of Arkansas as the governing law. Consequently, in its order granting summary judgment, the District Court held that Oklahoma law governed the pre-1997 contracts and Arkansas law governed the contracts entered into thereafter. To decide the effect of the contractual choice-of-law clause, we look to the forum state's choice-of-law rules. See Dang v. UNUM Life Ins. Co. of Am., 175 F.3d 1186, 1190 (10th Cir.1999) (A federal court adjudicating state law claims must apply the forum state's choice of law principles.). Under Oklahoma law, a contract will be governed by the laws of the state where the contract was entered into unless otherwise agreed and unless contrary to the law or public policy of the state where enforcement of the contract is sought. Williams v. Shearson Lehman Bros., Inc., 917 P.2d 998, 1002 (Okla.Civ. App.1995). Because we conclude that the Growers' unconscionability claim fails under both Oklahoma and Arkansas law, we need not decide whether the application of Arkansas law would be contrary to Oklahoma's law or public policy. In reaching this decision, we review the District Court's interpretation of state law de novo. Steiner Corp. v. Johnson & Higgins of Cal., 135 F.3d 684, 690 (10th Cir.1998) (citing Salve Regina College v. Russell, 499 U.S. 225, 111 S.Ct. 1217, 113 L.Ed.2d 190 (1991)). As an initial matter, the Oklahoma Supreme Court has never addressed whether Oklahoma common law would recognize an affirmative cause of action seeking damages for unconscionability in contract. Nevertheless, Oklahoma's unconscionability standard is so onerous that the Growers cannot meet that standard here. An unconscionable contract is one in which, at the time of making of the contract, and in light of the general commercial background and commercial needs of a particular case, clauses are so one-sided as to oppress or unfairly surprise one of the parties. Barnes v. Helfenbein, 548 P.2d 1014, 1020 (Okla.1976). Unconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties, together with contractual terms which are unreasonably favorable to the other party. Id. Whether the Growers lacked any meaningful choice is determined by `all the circumstances surrounding the transaction.' Id. at 1020 n. 12 (quoting Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449-50 (D.C.Cir.1965)). Relevant factors include whether the aggrieved party had a reasonable opportunity to understand the terms of the contract and whether the important terms were hidden in a maze of fine print or were minimized by deceptive sales practices. Id. (quotation omitted). Generally, one who signs an agreement without full knowledge of its terms might be held to assume the risk that he has entered a one-sided bargain. Id. (quotation omitted). On the other hand, if there is a gross inequality of bargaining power and the aggrieved party signs a commercially unreasonable contract with little or no knowledge of its terms, it is hardly likely that his consent, or even an objective manifestation of his consent, was ever given to all the terms. Id. (quotation omitted). Similar principles apply in Arkansas. In assessing whether a contract or a particular provision is unconscionable, the court must review the totality of the circumstances surrounding the negotiation and execution of the contract, taking into consideration whether there is a gross inequality of bargaining power between the parties and whether the aggrieved party was made aware of and comprehended the provision in question. Jordan, 207 S.W.3d at 535. Importantly, however, it is [generally] not the province of the courts to scrutinize all contracts with a paternalistic attitude and summarily conclude that they are partially or totally unenforceable merely because an aggrieved party believes that the contract has subsequently proved to be unfair or less beneficial than anticipated. Assoc. Press v. S. Ark. Radio Co., 34 Ark.App. 211, 809 S.W.2d 695, 697 (1991) (quotation and alteration omitted). Indeed, in Arkansas, parties are free to make contracts based on whatever terms and conditions they agree upon, provided it is not illegal or tainted with some infirmity such as fraud, overreaching, or the like. Hancock v. Tri-State Ins. Co., 43 Ark.App. 47, 858 S.W.2d 152, 154 (1993) (en banc). None of these circumstances are present here. Although the District Court recognized the potential for some inequality of bargaining power, it was not a gross inequality of bargaining power. The court noted that the availability of the broiler contracts is well-known in the region and has produced a waiting list of people who wish to become growers under the contracta contract which is available for review prior to engaging in the capital investment needed to become a grower. The Growers argue that the inequality of bargaining power should not be determined by reference to the availability of contracts and the fact that many people want to become a grower for OK. Rather, they suggest that the court consider whether they lacked any meaningful choice as to the terms of the contract and whether they had an alternative source for obtaining the desired service or product. Although Arkansas case law does suggest that these are relevant considerations, see Nat'l Union Fire Ins. Co. of Pittsburgh v. Guardtronic, Inc., 76 Ark.App. 313, 64 S.W.3d 779, 783-84 (2002), the Growers are incorrect in dismissing the fact that they initiated the contracting process with OK (i.e., OK did not solicit their business) as irrelevant to the analysis. In Jordan, the plaintiff was a landscaper who rented large equipment from the defendant. 207 S.W.3d at 528. The rental agreement contained a boilerplate provision excusing the defendant from liability for the consequences of its own negligence in connection with the rental of the equipment. Id. at 531-32. After the plaintiff was injured by the equipment, he sued, arguing that the exculpatory clause was unconscionable and therefore unenforceable. The Arkansas Supreme Court disagreed. The court found no evidence of a gross inequality of bargaining power when the plaintiff sought out the services of the defendant and paid for the rental equipment after being shown how to operate it. Id. at 536; see also Barnes, 548 P.2d at 1021 (applying Oklahoma law, court held that defendant did not behave unconscionably when the plaintiff's representative sought out the defendant to enter into a contract). Furthermore, the Growers do not suggest that they are unsophisticated parties unable to evaluate the risks of the contract prior to entering into it. And they do not suggest that they failed to read and understand the terms of the contract prior to entering into it or even prior to building the chicken houses. Also worthy of note is that some of the named plaintiffs have been operating under this allegedly unconscionable contract for nearly twenty years. Generally, [t]he fairness or unfairness, folly or wisdom, or inequality of contracts are questions exclusively within the rights of the parties to adjust at the time the contract is made. Id. We therefore affirm the District Court's grant of summary judgment in favor of OK on the Growers' unconscionability claim.