Court Opinion

ID: 9525900
Source: CourtListenerOpinion
Date Created: 2023-08-07 03:09:13.711717+00
Date Added: 2024-06-11T13:17:22.344929
License: Public Domain

PRESIDING JUSTICE STEWART,2  concurring in part and dissenting in part: I concur with the majority in its decision that the issue of procedural unconscionability should be determined by the court, not the arbitrator. I also concur in its determination that the circuit court erred in finding that the arbitration provision of the Customer Agreement is substantively unconscionable because class arbitration would be cost-prohibitive for the plaintiff. Under the facts of this case, I agree that the plaintiff failed to meet her burden of proof that she is incapable of meeting those costs. I respectfully dissent, however, from the decision of the majority that the arbitration provision in the Customer Agreement is not procedurally unconscionable. In this case, the circuit court found the arbitration provision contained in the Customer Agreement procedurally unconscionable, stating: “The arbitration provision is procedurally unconscionable because it is printed in *** about eight[-]point font in a ten[-]paneled[3] fold[ ]up pamphlet with each panel of the pamphlet containing approximately seven-hundred *** words. The ‘Customer Agreement’ is force[-]fed to subscribers *** on a take[-]it[-]or[-]heave[-]it [sic] basis. There is no opportunity for a consumer to negotiate the terms of the document. The provision regarding arbitration is inconspicuously placed in the pamphlet, where it was unlikely to be noticed, much less read, and sent after the purchase and installation of the equipment and after service had already begun.” I agree with this analysis and I would affirm the circuit court’s judgment denying DirecTV’s motion to stay proceedings and to compel arbitration. It is clear that, despite DirecTV’s claims to the contrary, its Customer Agreement containing the arbitration provision is an adhesion contract under Illinois law. The parties — Bess, a consumer, and DirecTV a nationwide provider of satellite television services — are in disparate bargaining positions. In addition, the Customer Agreement containing the arbitration provision is a form contract, which Bess had no hand in drafting and which DirecTV offered to Bess on a take-it-or-leave-it basis. See Williams v. Illinois State Scholarship Comm’n, 139 Ill. 2d 24, 72, 563 N.E.2d 465, 487 (1990) (an adhesion contract is one in which the parties are in disparate bargaining positions and one party has no hand in drafting the agreement but, instead, must “take it or leave it” as the other party drafted it). However, “the fact that a contract is offered in a form contract on a take-it-or-leave-it basis does not automatically render a contract term procedurally unconscionable.” Kinkel v. Cingular Wireless, LLC, 357 Ill. App. 3d 556, 563, 828 N.E.2d 812, 818 (2005), aff’d, 223 Ill. 2d 1, 857 N.E.2d 250 (2006). As the majority points out, the Illinois Supreme Court noted in Kinkel: “Such contracts *** are a fact of modern life. Consumers routinely sign such agreements to obtain credit cards, rental cars, land and cellular telephone service, home furnishings and appliances, loans, and other products and services. It cannot reasonably be said that all such contracts are so procedurally unconscionable as to be unenforceable.” Kinkel, 223 Ill. 2d at 26, 857 N.E.2d at 266. “This, of course, does not mean that offering a contract term on a take-it-or-leave-it basis is irrelevant in determining whether a contract provision is procedurally unconscionable; indeed, it is an important factor to consider.” Kinkel, 357 Ill. App. 3d at 563, 828 N.E.2d at 818-19. “It simply means that something more is required before we find a provision to be procedurally unconscionable.” Kinkel, 357 Ill. App. 3d at 563, 828 N.E.2d at 819. “Illinois courts have long found provisions offered on a take-it-or-leave-it basis and also ‘hidden in a maze of fine print’ to be procedurally unconscionable.” Kinkel, 357 Ill. App. 3d at 563, 828 N.E.2d at 819, quoting Frank’s Maintenance & Engineering, Inc. v. C.A. Roberts Co., 86 Ill. App. 3d 980, 990, 408 N.E.2d 403, 410 (1980). As the Illinois Supreme Court further noted in Kinkel: “ ‘Procedural unconscionability consists of some impropriety during the process of forming the contract depriving a party of a meaningful choice. [Citations.] Factors to be considered are all the circumstances surrounding the transaction^] including the manner in which the contract was entered into, whether each party had a reasonable opportunity to understand the terms of the contract, and whether important terms were hidden in a maze of fine print; both the conspicuousness of the clause and the negotiations relating to it are important, albeit not conclusive factors in determining the issue of unconscionability. [Citation.] To be a part of the bargain, a provision *** must *** have been bargained for [or] brought to the [consumer’s] attention or be conspicuous. *** This requirement that the seller obtain the knowing assent of the buyer “does not detract from the freedom to contract, unless that phrase denotes the freedom to impose the onerous terms of one’s carefully drawn printed document on an unsuspecting contractual partner. Rather, freedom to contract is enhanced by a requirement that both parties be aware of the burdens they are assuming. The notion of free will has little meaning as applied to one who is ignorant of the consequences of his acts.” [Citations.]’ ” Kinkel, 223 Ill. 2d at 23-24, 857 N.E.2d at 264-65, quoting Frank’s Maintenance & Engineering, Inc., 86 Ill. App. 3d at 989-90, 408 N.E.2d at 410. In Razor v. Hyundai Motor America, 222 Ill. 2d 75, 854 N.E.2d 607 (2006), the Illinois Supreme Court clarified the type of additional circumstance that will render an adhesion contract with a consumer unconscionable and unenforceable. The contractual provision at issue in that case was a consequential damages disclaimer in a limited warranty. The evidence revealed that the disclaimer and warranty were contained in an owner’s manual in the glove compartment of the vehicle purchased by the plaintiff. The plaintiff never saw the disclaimer until after the purchase, and the sale contract made no mention of the disclaimer. The court noted the plaintiffs arguments that the disclaimer was on a preprinted form offered on a take-it-or-leave-it basis, and then it stated: “However, we need not — and we do not — hold that these general circumstances alone or in combination render the clause unconscionable. An additional fact particular to this case tips the balance in plaintiffs favor. That is the lack of evidence that the warranty, which contained the disclaimer of consequential damages, had been made available to the plaintiff at or before the time she signed the sale contract. *** *** [Procedural unconscionability refers to a situation where a term is so difficult to find, read, or understand that the plaintiff cannot fairly be said to have been aware he was agreeing to it. Surely, whatever other context there might be in which a contractual provision would be found to be procedurally unconscionable, that label must apply to a situation such as the case at bar where plaintiff has testified that she never saw the clause; nor is there any basis for concluding that plaintiff could have seen the clause, before entering into the sale contract.” (Emphasis in original.) Razor, 222 Ill. 2d at 100-02, 854 N.E.2d at 623. Although the majority attempts to distinguish Razor because the clause at issue was a warranty governed by regulations of the Federal Trade Commission (FTC), a close reading of the opinion makes it clear that the court’s decision is based squarely upon the law of unconscionability. In fact, the court notes that the FTC regulations were only raised upon rehearing and simply “validated [the court’s] legal analysis.” Razor, 222 Ill. 2d at 103, 854 N.E.2d at 624. In the present case, DirecTV argues that the arbitration provision in the Customer Agreement is conspicuous. The arbitration provision is separated by a break in the text and is identified by a heading printed in bold, all-capitalized letters that states: “RESOLVING DISPUTES.” However, the arbitration provision is printed in single-spaced lines of very small font on the last two panels of the multipaneled foldup pamphlet. Moreover, as the Illinois Supreme Court explained in Razor, “It simply does not matter how large the type was or how clearly the disclaimer was expressed if the consumer did not have the opportunity to see the language before entering into the contract ***.” (Emphasis in original.) Razor, 222 Ill. 2d at 101, 854 N.E.2d at 623. In this case, it is undisputed that DirecTV did not mail Bess a copy of the Customer Agreement containing the arbitration provision until after she had already acquired the satellite television equipment and after she had contracted to receive DirecTV service. Therefore, Bess did not see, and could not have seen, the arbitration provision before entering into the contract with DirecTV Accordingly, as the Illinois Supreme Court stated in Razor, “[s]urely, whatever other context there might be in which a contractual provision would be found to be procedurally unconscionable, that label must apply to a situation such as the case at bar” (Razor, 222 Ill. 2d at 101, 854 N.E.2d at 623), where Bess did not see and could not have seen the arbitration provision before entering into the contract. DirecTV argues that although it sent Bess the Customer Agreement after she had contracted for DirecTV service, she had the opportunity to cancel the service if she rejected the terms of the arbitration provision. Thus, the majority asserts, “[T]he Customer Agreement at issue is typical of consumer agreements for computer, credit card, and other online or catalog purchases wherein the agreements are delivered with the product or the first billing and consumers may approve or reject the terms on receipt of the agreement.” 381 Ill. App. 3d at 239-40. As authority for this proposition, the majority cites Kinkel and Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997). In Kinkel, however, the plaintiff had actually signed the customer agreement for cellular telephone services before services commenced. Kinkel, 223 Ill. 2d at 5, 857 N.E.2d at 254. Likewise, in Hill, the customer agreement was in the box with the computer the plaintiff had ordered from the defendant, and the agreement provided that the customer could avoid the entire transaction by returning the computer within 30 days, without penalty. Hill, 105 F.3d at 1148. Contrary to the majority’s claim, I have found no case based upon Illinois law validating an adhesion contract in a consumer transaction where the consumer did not receive the initial written agreement until some time after the consumer commenced receiving the services for which she contracted. In this case, by the time Bess received the Customer Agreement, she had already acquired the satellite television equipment, the equipment had already been installed, and Bess had ordered and was receiving DirecTV’s services. The Customer Agreement did not provide for the reimbursement of her equipment costs if she chose to discontinue the service instead of accepting the terms of the arbitration provision; nor is there any indication in the record that she could have returned the equipment without incurring a penalty. Further, the 2001 version of the Customer Agreement provides for a “deactivation fee” if a customer cancels service. It is clear that DirecTV required Bess to contract to receive its service and substantially change her economic position before she was provided with the Customer Agreement that contained the arbitration provision. In order to cancel service at that point, after she had taken all necessary steps to be a DirecTV subscriber, she would have had to suffer the time, effort, and expense associated with switching to another service provider. Therefore, Bess was deprived of a “ ‘meaningful choice’ ” in determining whether to accept the arbitration provision of the Customer Agreement. See Kinkel, 223 Ill. 2d at 23, 857 N.E.2d at 264, quoting Frank’s Maintenance & Engineering, Inc., 86 Ill. App. 3d at 989, 408 N.E.2d at 410. Although the majority relies heavily upon the fact that the record in this case is silent on how Bess obtained her equipment, the routine manner in which DirecTV contracts with its customers is not in dispute. In this court’s previous decision in this case, the ordinary transaction was described as follows: “DirecTV provides television programming services via satellite to consumers throughout the nation. To obtain these services, a potential DirecTV subscriber typically first purchases from an independent retailer the equipment necessary to receive a satellite signal. The potential customer then calls DirecTV and selects one or more of DirecTV’s programming packages. DirecTV then activates the subscriber’s service and mails the customer a copy of the parties’ written contract, entitled ‘Customer Agreement’ (Customer Agreement), along with his or her first bill. The Customer Agreement sets forth the parties’ rights and obligations and explains the terms and conditions pursuant to which DirecTV provides its service.” Bess v. DirecTV, Inc., 351 Ill. App. 3d 1148, 1149, 815 N.E.2d 455, 456 (2004). In its statement of facts in its brief before this court, DirecTV adopted the above statement verbatim. I see little difference between the circumstances in Razor, where the consumer did not have an opportunity to see the warranty disclaimer until after the purchase, and the circumstances here where the consumer has no opportunity to see the arbitration provision until she has acquired the equipment and contracted for services. As a practical matter, DirecTV’s offer to cancel service if a consumer does not agree with its contract is virtually meaningless given that the consumer must then suffer the time, effort, and expense of contracting with another television service provider. The majority’s decision allows DirecTV to “hook” the consumer into using its product and then impose upon the consumer its carefully drawn contract when it is far less likely to be rejected. Given all the circumstances in the present case, I believe that the arbitration provision is procedurally unconscionable and that the procedural unconscionability is sufficient to invalidate the arbitration provision. The parties — Bess, a consumer, and DirecT\( a nationwide provider of satellite television services — were in disparate bargaining positions. The Customer Agreement containing the arbitration provision was a preprinted form contract, and it was a contract of adhesion in that Bess had no hand in drafting it but, instead, had to “take it or leave it” as DirecTV drafted it. The arbitration provision was printed in single-spaced lines of very small font on the last two panels of a multipaneled pamphlet, which DirecTV mailed to Bess along with her monthly bill after Bess had already acquired satellite television equipment, the equipment had already been installed, and Bess had already contracted to receive DirecTV service. Accordingly, Bess had not seen and could not have seen the arbitration provision before entering into the contract with DirecTV See Razor, 222 Ill. 2d at 101, 854 N.E.2d at 623. Under the terms of the Customer Agreement, if Bess had opted to discontinue her DirecTV service instead of accepting the terms of the arbitration provision, DirecTV did not agree to reimburse her for the cost of the equipment; nor is there any indication in the record that she could have returned the equipment without incurring a penalty. Under these circumstances, I believe it would be unconscionable to enforce the arbitration provision, because Bess was deprived of a “ ‘meaningful choice’ ” in accepting the terms of the Customer Agreement. See Kinkel, 223 Ill. 2d at 23, 857 N.E.2d at 264, quoting Frank’s Maintenance & Engineering, Inc., 86 Ill. App. 3d at 989, 408 N.E.2d at 410. For the foregoing reasons, I would affirm the order of the circuit court of St. Clair County denying DirecTV’s motion to stay proceedings and to compel arbitration.  Originally, Justice McGlynn was assigned to this panel. Presiding Justice Stewart was later substituted on the panel. He has reviewed the briefs and listened to the audiotape of oral argument.   In fact, the 2001 Customer Agreement, to which the circuit court referred, has only eight panels. The 2004 Customer Agreement, which is not at issue in this appeal, has 10 panels.