Court Opinion

ID: 815934
Source: CourtListenerOpinion
Date Created: 2013-01-25 02:47:01+00
Date Added: 2024-06-11T08:54:59.759662
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                            FILED
                            FOR THE NINTH CIRCUIT                              JAN 23 2013

                                                                          MOLLY C. DWYER, CLERK
DOYLE WHEELER; CARRI WHEELER,                    No. 11-35984               U.S. COURT OF APPEALS

husband and wife, individually and on
behalf of similarly situated Washington          D.C. No. 2:10-cv-00202-LRS
residents,
             Plaintiffs - Appellees,
  v.                                             MEMORANDUM*

NOTEWORLD LLC, DBA NoteWorld
Servicing Center; NATIONWIDE
SUPPORT SERVICES INC., a California
corporation; JOHN DOES, A-K; JANE
DOES, A-K,

              Defendants,
  and

FREEDOM DEBT CENTER, a California
corporation,

              Defendant - Appellant.

                   Appeal from the United States District Court
                     for the Eastern District of Washington
                    Lonny R. Suko, District Judge, Presiding

                     Argued and Submitted December 3, 2012
                              Seattle, Washington

Before: SCHROEDER, McKEOWN, and TALLMAN, Circuit Judges.

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      Plaintiffs Doyle and Carrie Wheeler brought a consumer debt diversity

action against Defendants Noteworld LLC, Freedom Debt Center (“Freedom”), and

others, arising from the Wheelers’ engagement of Freedom to provide them with

debt settlement services. Freedom appeals the denial of its motion to compel

arbitration. We affirm.

      The district court concluded, and the parties do not dispute, that three

provisions of the arbitration section of the Debt Settlement Agreement were

substantively unconscionable: the 30-day limitation period for claims; the loser-

pays-all provision; and the provision requiring the Wheelers to arbitrate their

Washington claim in Orange County California.

      Under Washington law, severance of unconscionable provisions from a

section of an agreement is not possible where the unconscionable provisions

permeate that section. McKee v. AT&T Corp., 191 P.3d 845, 860 (Wash. 2008).

This contract’s arbitration section has only four sentences and three of these

contain an unconscionable provision. The section is materially similar to the one

in McKee where four provisions of a consumer services contract were held to be

substantively unconscionable and to permeate the dispute resolution section. The

Supreme Court of Washington treated the McKee arbitration section differently

from the arbitration provisions contained in the employment contracts at issue in

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Adler v. Fred Lind Manor, 103 P.3d 773 (Wash. 2004) and Zuver v. Airtouch

Communications, Inc., 103 P.3d 753 (Wash. 2004). In those cases, severance of

the unconscionable provisions was ordered because there were only two, and the

rest of the provisions in the lengthy arbitration agreements could stand on their

own. Here, as in McKee, the remaining provisions cannot. The unconscionable

provisions “taint the entire [] section, such that severance would essentially require

us to rewrite the [] agreement.” McKee, 191 P.3d at 860–61. Regardless of

whether the severance issue is one of law to be decided de novo or a discretionary

determination, we must affirm the district court in this case. There was no error of

law or abuse of discretion.

      AFFIRMED.

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