Opinion ID: 1678650
Heading Depth: 1
Heading Rank: 3

Heading: Grossly Favorable Terms

Text: The first indicium of unconscionability is the breadth of the clause. The arbitration provision in Branch's contract is unusually broad in scope and application. It applies to every dispute[ ] or controversy[ ] ... relating to  every actual or potential transactionwhether past, present, or future and to every person, whether signatory or nonsignatory to any document, involved in such a transaction between the parties. (Emphasis added.) Thus, it applies to every cause of action that could conceivably arise in favor of Branch, and to every individual against whom a claim could conceivably be brought. This Court has often recognized that the phrase relating to is one of the broadest of the coverage provisions. Beaver Constr. Co. v. Lakehouse, L.L.C., 742 So.2d 159, 165 (Ala. 1999); Green Tree Fin. Corp. of Alabama v. Vintson, 753 So.2d 497 (Ala.1999); Kenworth of Dothan, Inc. v. Bruner-Wells Trucking, Inc., 745 So.2d 271 (Ala.1999); Ex parte Conference America, Inc., 713 So.2d 953 (Ala.1998); Reynolds & Reynolds Co. v. King Autos., Inc., 689 So.2d 1 (Ala.1996); Ex parte Gates, 675 So.2d 371 (Ala.1996); Old Republic Ins. Co. v. Lanier, 644 So.2d 1258 (Ala.1994). A second indicium of unconscionability is the provision purporting to invest the arbitrator with the threshold issues of arbitrability. Such authority of the arbitrator to determine its own authority may itself be an indicium of unconscionability. Brilliant Homes, Ltd. v. Lind, 722 So.2d 753, 755 (Ala.1998) (Lyons, J., concurring in the result). A third indicium is the provision exempting the Lenders from the duty to arbitrate and expressly reserving for them the right to try to a jury their claims against Branch up to $10,000. Practically speaking, this provision benefits only the Lenders. In other words, American General reserved for itself the right to collect by judicial action the loan paymentsthe only species of claim it would ever realistically be expected to assert against Branchwhile requiring Branch to settle by arbitration claims such as breach of contract and fraudthe species of claims she would most likely assert against the Lenders. More than once, this Court has expressed concern about such provisions. In Northcom, Ltd. v. James, 694 So.2d 1329 (Ala.1997), two Justices stated in the main opinion: [I]n a case involving a contract of adhesion, if it is not shown that the party in an inferior bargaining position had a meaningful choice of agreeing to arbitration or not, and if the superior party has reserved to itself the choice of arbitration or litigation, a court may deny the superior party's motion to compel arbitration based on the doctrines of mutuality of remedy and unconscionability. Id. at 1338. In Ex parte McNaughton, 728 So.2d 592 (Ala.1998), cert. denied sub nom. McNaughton v. United Healthcare Servs., Inc., 528 U.S. 818, 120 S.Ct. 59, 145 L.Ed.2d 52 (1999), we disapproved that rationale; however, in Ex parte Parker, 730 So.2d 168, 171 (Ala.1999), we said: The Parkers' argument has merit to the extent that the lack of mutuality of remedy can be one factor, along with others, that a court may consider in determining whether an arbitration clause is unconscionable. Thus, the absence of mutuality of remedy is still relevant in an unconscionability analysis. See Green Tree Fin. Corp. v. Wampler, 749 So.2d 409, 416 (Ala.1999) (while the agreement restricts the Wamplers to arbitration while reserving to Green Tree the option to litigate, this fact, standing alone, is not sufficient to warrant a finding of unconscionability). This provision is particularly significant in view of the companion provision purporting to limit the right of the arbitrator to award an amount exceed[ing] five times the amount of economic loss. (Emphasis added.) This limitation includes not only punitive damages, but all species of noneconomic loss, such as mental anguish. It goes without saying that such damages may be recovered in litigation. Under these contracts, the arbitrator cannot award the full panoply of relief available in state courts under Alabama law. Roberson v. Money Tree of Alabama, Inc., 954 F.Supp. 1519, 1526 (M.D.Ala.1997). Although the Roberson court held that the arbitration provision at issue was not unconscionable, it expressly noted that the contract did not limit the amount recoverable in arbitration. Id. Significantly, it further stated: The court therefore does not have before it whether a contract that not only requires the borrower to arbitrate any claim, while reserving for the lender the right to seek judicial remedies in the eventuality of default, but also restricts the borrower's range of relief in arbitration, is unconscionable. Id. n. 8 (emphasis added). See also Wampler, 749 So.2d at 415 (one indicium of unconscionability is the oppressiveness or unfairness of the mechanism of arbitration). That, of course, is this case. It is one in which the Lenders have reserved for themselves the right to full redress for their claims, but denied that right to Branch. In other words, the contract limits not only the right to a specific forum, but the right to a remedy itself. In that respect, this case differs fundamentally from others in which we have upheld clauses reserving for one party the right to litigate, but restricting the other party to arbitration. For example, in Napier, supra, the pertinent provision stated: The parties agree and understand that the arbitrator shall have all powers provided by the law and the Contract. These powers shall include all legal and equitable remedies including, but not limited to, money damages, declaratory relief and injunctive relief. 723 So.2d at 51 (emphasis added). See also Ex parte Parker, 730 So.2d at 170 (functionally identical provision); Green Tree Fin. Corp. v. Vintson, 753 So.2d 497, 500 (same); Ex parte Smith, 736 So.2d 604 (Ala.1999) (same). In short, the arbitration provisions in this contract are so grossly favorable to the Lenders as to pass the first prong of the simplified Layne v. Garner test. [2] Thus, it remains only to be determined whether Branch had any meaningful choice.