Court Opinion

ID: 3050931
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:33:17.525054+00
Date Added: 2024-06-11T11:49:24.729238
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

KATHLEEN LOWDEN and JOHN                
MAHOWALD, individually and on
behalf of all the members of the
                                              No. 06-35395
class of persons similarly situated,
                Plaintiffs-Appellees,
                                               D.C. No.
                                            CV-05-01482-MJP
                  v.
                                               OPINION
T-MOBILE USA, INC., a foreign
corporation,
               Defendant-Appellant.
                                        
        Appeal from the United States District Court
          for the Western District of Washington
        Marsha J. Pechman, District Judge, Presiding

                 Argued and Submitted
          November 7, 2007—Seattle, Washington

                   Filed January 22, 2008

    Before: William C. Canby, Jr., Susan P. Graber, and
            Ronald M. Gould, Circuit Judges.

                  Opinion by Judge Gould

                              839
                 LOWDEN v. T-MOBILE USA                 841

                        COUNSEL

Stephen M. Rummage, Davis Wright Tremaine LLP, Seattle,
Washington, for the defendant-appellant.

David E. Breskin, and Daniel F. Johnson, Breskin Johnson &
Townsend, Seattle, Washington, for the plaintiffs-appellees.
842                LOWDEN v. T-MOBILE USA
                          OPINION

GOULD, Circuit Judge:

                               I

   The issues on appeal are whether the arbitration provisions
in Defendant T-Mobile’s service agreements with two of its
customers are enforceable under Washington state law and, if
not, whether the state law is preempted by the Federal Arbi-
tration Act (“FAA”), 9 U.S.C. §§ 1-16. After two consumers
of T-Mobile’s cellular phone service brought a class action
against T-Mobile in state court for breach of contract and vio-
lation of the Washington Consumer Protection Act (the
“CPA”), Wash. Rev. Code § 19.86.010-19.86.920, T-Mobile
removed the case to federal district court and moved to com-
pel arbitration per its service agreements. The district court
denied T-Mobile’s motion to compel arbitration, holding that
the arbitration agreements were tainted by substantive uncon-
scionability and thus were unenforceable. We conclude that
the Washington State Supreme Court’s decision in Scott v.
Cingular Wireless, 161 P.3d 1000 (Wash. 2007), establishes
that T-Mobile’s arbitration provision is substantively uncon-
scionable and unenforceable under Washington state law, and
that there is no federal preemption in light of our decision in
Shroyer v. New Cingular Wireless Servs., Inc., 498 F.3d 976
(9th Cir. 2007). We therefore affirm.

                               II

   The two named Plaintiffs, Kathleen Lowden and John
Mahowald, are or were T-Mobile customers whose service
agreements contained mandatory arbitration provisions with
slightly varying terms. Plaintiffs sued T-Mobile, alleging that
the service provider had improperly charged them for certain
fees beyond the advertised price of service, charged them for
calls during a billing period other than that in which the calls
were made, and charged them for roaming and other services
                      LOWDEN v. T-MOBILE USA                           843
that should have been free. T-Mobile moved to compel arbi-
tration in accord with the arbitration provisions in Lowden’s
and Mahowald’s service agreements.

   In Lowden’s service agreement,1 immediately above the
signature line, the following provision appeared: “Disputes
are subject to mandatory arbitration pursuant to paragraph 19.
See Reverse.” Paragraph 19 stated:

     Mandatory Arbitration. Any controversy, claim or
     dispute between you and Company arising under this
     Agreement, excluding actions by Company to collect
     unpaid charges, shall be submitted to final, binding
     arbitration under the auspices of the American Arbi-
     tration Association (“AAA”) pursuant to its pub-
     lished Wireless Industry Arbitration Rules,
     incorporated herein by this reference and available
     by calling the AAA at 800-778-7879 or visiting its
     web site at http://www.adr.org. Notice of an arbitra-
     tion commenced by you shall be served on Compa-
     ny’s registered agent. All claims shall be arbitrated
     individually and you agree that no person shall bring
     a punitive [sic] or certified class action to arbitration
     or seek to consolidate or bring previously consoli-
     dated claims in arbitration. The arbitrator shall have
     no authority to award punitive damages. YOU
   1
     We must assure ourselves that the constitutional standing requirements
are satisfied before proceeding to the merits. United States v. Hays, 515
U.S. 737, 742 (1995); Casey v. Lewis, 4 F.3d 1516, 1524 (9th Cir. 1993).
Although the district court and T-Mobile suggest that Lowden may not
have standing to pursue her claims, we need not reach this issue. In a class
action, standing is satisfied if at least one named plaintiff meets the
requirements. See Armstrong v. Davis, 275 F.3d 849, 860 (9th Cir. 2001).
Here, the parties do not dispute that Mahowald has standing from his
alleged injury in fact that is both traceable to T-Mobile’s alleged conduct
and likely to be redressed by the damages that Mahowald seeks. See Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (discussing Article
III standing requirements).
844                 LOWDEN v. T-MOBILE USA
      ACKNOWLEDGE THAT THIS ARBITRATION
      PROVISION CONSTITUTES A WAIVER OF
      ANY RIGHT TO A JURY TRIAL.

Those provisions were also in the Terms & Conditions that
accompanied the phone delivered to Lowden and that stated
that, “By activating Service with Company, you acknowledge
that you have read and agree to the terms of this Agreement.”
T-Mobile asserts that, had Lowden or her then-husband dis-
agreed with those terms, they could have canceled service and
thereby avoided arbitration.

   The service agreement in effect when Mahowald signed up
with T-Mobile was slightly different in substance. While con-
taining an almost identical provision above the signature line,
the provision on the reverse stated:

      Mandatory Arbitration; Dispute Resolution.
      ANY CLAIM OR DISPUTE BETWEEN YOU
      AND US ARISING UNDER OR IN ANY WAY
      RELATED TO OR CONCERNING THE AGREE-
      MENT, AND/OR OUR PROVISION TO YOU OF
      GOODS, SERVICE, OR UNITS, SHALL BE SUB-
      MITTED TO FINAL, BINDING ARBITRATION
      WITH THE AMERICAN ARBITRATION ASSO-
      CIATION (“AAA”) PURSUANT TO ITS PUB-
      LISHED WIRELESS INDUSTRY ASSOCIATION
      RULES, INCORPORATED HEREIN BY THIS
      REFERENCE AND AVAILABLE BY CALLING
      THE AAA AT 800-778-7879 OR VISITING ITS
      WEBSITE AT http://www.adr.org. Any arbitration
      proceeding shall be subject to the choice of law pro-
      vision in Paragraph 22. Notice of an arbitration com-
      menced by you must be served on our registered
      agent. No party may act as a representative of other
      claimants or potential claimants in any dispute, and
      two or more individuals’ disputes may not be consol-
      idated or otherwise determined in one proceeding.
               LOWDEN v. T-MOBILE USA                       845
An arbitrator may not award relief in excess of or
inconsistent with the provisions of the Agreement,
order consolidation or arbitration on a class wide
basis, or award lost profits, punitive, incidental, or
consequential damages or any other damages other
than the prevailing party’s direct damages, except
that the arbitrator may order injunctive or declara-
tory relief pursuant to applicable law. All administra-
tive expenses of an arbitration will be equally
divided between you and Us, except that if the claim
is less that $1,000, you will be obligated to pay only
$25. If the claim is less than $25, We will pay all
administrative expenses. Each party agrees to pay
the fees and costs of its own counsel, experts, and
witnesses at arbitration. Subject to the foregoing lim-
itations on consolidated or classwide proceedings,
you agree, however, that if you fail to timely pay
amounts due, We may assign your account for col-
lection and the collection agency may pursue such
claims in court limited strictly to the collection of the
past due debt and any interest or cost of collection
permitted by law or the Agreement.

YOU ACKNOWLEDGE AND AGREE THAT
THIS ARBITRATION PROVISION CONSTI-
TUTES A WAIVER OF ANY RIGHT TO LOST
PROFITS, PUNITIVE, SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR TREBLE
DAMAGES (“DISCLAIMED DAMAGES”), A
JURY TRIAL, OR PARTICIPATION AS A
PLAINTIFF OR AS A CLASS MEMBER IN A
CLASS ACTION. IF FOR ANY REASON THIS
ARBITRATION CLAUSE IS DEEMED INAPPLI-
CABLE OR INVALID, YOU AND WE BOTH
WAIVE ANY CLAIMS TO RECOVER DIS-
CLAIMED DAMAGES AND ANY RIGHT TO
PURSUE, OR PARTICIPATE AS A PLAINTIFF
OR A CLASS MEMBER IN, CLAIMS ON A
846                LOWDEN v. T-MOBILE USA
      CLASSWIDE, CONSOLIDATED, OR REPRE-
      SENTATIVE BASIS.

As in Lowden’s case, the Terms & Conditions accompanying
the phones delivered to Mahowald contained the same arbitra-
tion provision, along with a similar warning that service acti-
vation constituted an agreement to be bound thereby.

   Relying on those arbitration provisions, T-Mobile brought
its motion to compel individual arbitration. The district court
denied the motion, holding that T-Mobile’s arbitration provi-
sions were tainted by substantive unconscionability and were
therefore unenforceable.

   The district court first determined that each named Plaintiff
had an agreement. Then, after dismissing Plaintiffs’ argument
that the agreements as a whole were procedurally unconscio-
nable, the court assessed the agreements for substantive
unconscionability. The court preliminarily noted that the
Washington State Supreme Court was considering Scott, 161
P.3d 1000, which, the court stated, “places squarely at issue
the question of whether class action prohibitions contained in
arbitration agreements are unconscionable under Washington
law and therefore unenforceable.” However, at the urging of
the parties to decide the issue nonetheless, the district court
declined to stay its ruling pending Scott. The district court
next turned to the unconscionability of each contested provi-
sion within the two arbitration agreements.

   The district court held that the prohibition on class relief
and the limitation on punitive damages, found in both agree-
ments, were each substantively unconscionable. The district
court also concluded that Mahowald’s attorney fees provision
was substantively unconscionable. Although the court
rejected the arguments that the remaining provisions were
invalid, it nonetheless declared both arbitration agreements to
be unenforceable, despite the severability provisions, because
they were “tainted with substantive unconscionability.” The
                   LOWDEN v. T-MOBILE USA                   847
district court denied T-Mobile’s motion to compel arbitration
and entered a stay so that T-Mobile could bring the present
interlocutory appeal. We have jurisdiction of this appeal pur-
suant to 9 U.S.C. § 16(a)(1)(A) and (B).

                              III

   We review de novo the denial of a motion to compel arbi-
tration. Ticknor v. Choice Hotels Int’l, Inc., 265 F.3d 931, 936
(9th Cir. 2001). We also review de novo the district court’s
interpretation of the validity and scope of the arbitration
clause. Id. We review for clear error the district court’s find-
ings of fact. Bradley v. Harris Research, Inc., 275 F.3d 884,
888 (9th Cir. 2001).

                              IV

   T-Mobile urges us to compel Plaintiffs to arbitrate in
accord with the terms of the agreement. T-Mobile argues that
the service agreements’ terms and the Federal Arbitration Act
mandate this result. Congress enacted the FAA more than
eighty years ago to advance the federal policy favoring arbi-
tration agreements. Section 2 states that arbitration agree-
ments made as part of contracts “evidencing a transaction
involving [interstate] commerce . . . shall be valid, irrevoca-
ble, and enforceable, save upon such grounds as exist at law
or in equity for the revocation of any contract.” 9 U.S.C. § 2
(emphasis added). Where, as here, a party attempts to litigate
claims covered by a commercial contract containing an arbi-
tration agreement subject to the FAA, the court must deter-
mine “(1) whether a valid agreement to arbitrate exists and,
if it does, (2) whether the agreement encompasses the dispute
at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207
F.3d 1126, 1130 (9th Cir. 2000). We apply state-law princi-
ples that govern the formation of contracts to determine
whether a valid arbitration agreement exists. First Options of
Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995).
848                   LOWDEN v. T-MOBILE USA
                                    A

   [1] We first address whether, under Washington state con-
tract law, a valid agreement to arbitrate exists. This requires
us to consider what is unconscionable and unenforceable
under Washington state law. After the district court denied T-
Mobile’s motion to compel arbitration, the Washington State
Supreme Court decided Scott v. Cingular Wireless, 161 P.3d
1000. In that case, the Washington State Supreme Court con-
sidered the enforceability of an arbitration provision within a
service agreement binding Cingular Wireless customers, and
held that the agreement was unconscionable and unenforce-
able under Washington law. Id. at 1002-03. As in T-Mobile’s
case, Cingular’s arbitration provision contained a clause bar-
ring class action litigation or arbitration.2 Id. at 1003.

   The Washington State Supreme Court initially noted that
the plaintiffs had submitted a declaration from the former
division chief for consumer protection in the Washington
State Attorney General’s office, declaring that that office “did
not have sufficient resources to respond to many individual
cases and often ‘relied on . . . private class action to correct
the deceptive or unfair industry practice and to reimburse con-
sumers for their losses.’ ” Id. at 1004. The court also acknowl-
edged the clear split of authority on the enforceability of class
action waivers in arbitration clauses. Id.

   Turning to the class action waiver’s enforceability, the
  2
    The remaining Cingular provisions differed slightly from T-Mobile’s
provisions. For instance, Cingular’s agreement provided that Cingular
would “pay the filing, administrator, and arbitration fees unless the cus-
tomer’s claim was found to be frivolous; that Cingular would reimburse
the customer for reasonable attorney fees and expenses incurred for the
arbitration (provided that the customer recovered at least the demand
amount); and that the arbitration would take place in the county of the cus-
tomer’s billing address.” Scott, 161 P.3d at 1003. The agreement had also
initially limited punitive damages, but Cingular subsequently removed that
limitation. Id.
                   LOWDEN v. T-MOBILE USA                    849
court first observed that “[a]n agreement that violates public
policy may be void and unenforceable.” Id. at 1005 (citing
Restatement (Second) of Contracts § 178 (1981)). The court
then discussed Washington’s “state policy favoring aggrega-
tion of small claims for purposes of efficiency, deterrence,
and access to justice.” Id. It noted that “when consumer
claims are small but numerous, a class-based remedy is the
only effective method to vindicate the public’s rights.” Id.

   The court held that Cingular’s particular class action waiver
was unconscionable. The court discussed the public policies
that class actions advance, declaring that, “without class
actions, consumers would have far less ability to vindicate the
CPA.” Id. at 1006. It also stated that the class action waiver
clause was “an unconscionable violation of [Washington’s]
policy to protect the public and foster fair and honest competi-
tion because it drastically forestall[ed] attempts to vindicate
consumer rights” and was, therefore, “substantively uncon-
scionable.” Id. (internal quotation marks and citation omitted).

   The court then noted that the agreement was additionally
unconscionable because it “in effect . . . exculpate[d] Cingular
from legal liability for any wrong where the cost of pursuit
outweighs the potential amount of recovery.” Id. at1007. It
asserted that the availability of a class action mechanism
would “transform[ ] a merely theoretically possible remedy
into a real one.” Id. The court reasoned that merely shifting
the cost of arbitration to Cingular did not seem likely to
“make it worth the time, energy, and stress to pursue such
individually small claims,” especially when attorney fees
would be awarded only if the plaintiffs recovered at least the
full amount of their demand. Id.

   [2] The court reasoned that, because the clause barred any
class action, in or outside arbitration, it functioned to “excul-
pate the drafter from liability for a broad range of undefined
wrongful conduct, including potentially intentional wrongful
conduct, and that such exculpation clauses are substantively
850                LOWDEN v. T-MOBILE USA
unconscionable.” Id. at 1008. The court concluded: “A clause
that unilaterally and severely limits the remedies of only one
side is substantively unconscionable under Washington law
for denying any meaningful remedy.” Id.

   [3] The Cingular class action waiver provision that Scott
declares to be unenforceable is indistinguishable in all mate-
rial respects from T-Mobile’s class action waiver. The Wash-
ington State Supreme Court’s holding in Scott requires us to
determine that T-Mobile’s class action waiver is substantively
unconscionable, and unenforceable, under Washington law.
T-Mobile’s class action waiver, like Cingular’s, bars class
actions in both litigation and arbitration, and the Washington
State Supreme Court’s unconscionability analysis in Scott
applies as forcefully to T-Mobile’s agreement.

   [4] We need not reach whether T-Mobile’s remaining pro-
visions are unconscionable. T-Mobile has expressly stated
that it does not consent to class action arbitration and that, as
a result, if we deem the class action waiver clause unconscio-
nable under Washington law, the entire arbitration provision
should be rendered unenforceable. Having determined that the
(nonseverable) class action waiver is invalid under Washing-
ton law, we hold that T-Mobile’s arbitration agreement is
unenforceable under Washington law.

                               B

   [5] We next consider T-Mobile’s argument that the Federal
Arbitration Act preempts Washington law from thus render-
ing T-Mobile’s class action waiver unconscionable, and
thereby rendering unenforceable its arbitration agreement.
The FAA provides that contractual arbitration agreements
“shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any
contract.” 9 U.S.C. § 2 (emphasis added).

   [6] The United States Supreme Court has interpreted this
statute to require that any state legal principle attempting to
                  LOWDEN v. T-MOBILE USA                   851
invalidate an arbitration agreement must be a principle that
applies to contracts generally. In Doctor’s Assocs., Inc. v.
Casarotto, 517 U.S. 681 (1996), for example, the Supreme
Court stated:

    “[G]enerally applicable contract defenses, such as
    fraud, duress, or unconscionability, may be applied
    to invalidate arbitration agreements without contra-
    vening § 2. Courts may not, however, invalidate
    arbitration agreements under state laws applicable
    only to arbitration provisions. By enacting § 2, we
    have several times said, Congress precluded States
    from singling out arbitration provisions for suspect
    status, requiring instead that such provisions be
    placed ‘upon the same footing as other contracts.’ ”

Id. at 687 (citations omitted). See also Southland Corp. v.
Keating, 465 U.S. 1, 16 n.11 (1984).

   T-Mobile argues that the FAA preempts Washington’s
determination that its class action waiver is unconscionable.
T-Mobile asserts that the Washington State Supreme Court’s
holding in Scott that Cingular’s class action waiver is uncon-
scionable is not a contractual rule of general applicability
under the FAA.

   We recently decided Shroyer v. New Cingular Wireless
Servs., Inc., 498 F.3d 976. In Shroyer, we considered the
enforceability of another Cingular arbitration agreement con-
taining a class action waiver. We determined not only that the
agreement was unconscionable under California law, but also
that the FAA did not preempt California law on this issue. Id.
at 987. We first surveyed California law on unconscionability,
and in particular the test the California Supreme Court set
forth in Discover Bank v. Superior Court of Los Angeles, 113
P.3d 1100 (Cal. 2005), requiring a finding of both procedural
and substantive unconscionability to render a provision
852                 LOWDEN v. T-MOBILE USA
invalid. Shroyer, 498 F.3d at 981-82 (citing Discover Bank,
113 P.3d at 1108). We quoted Discover Bank’s reasoning:

      “We do not hold that all class action waivers are nec-
      essarily unconscionable. But when the waiver is
      found in a consumer contract of adhesion in a setting
      in which disputes between the contracting parties
      predictably involve small amounts of damages, and
      when it is alleged that the party with the superior
      bargaining power has carried out a scheme to delib-
      erately cheat large numbers of consumers out of
      individually small sums of money, then, at least to
      the extent the obligation at issue is governed by Cali-
      fornia law, the waiver becomes in practice the
      exemption of the party ‘from responsibility for [its]
      own fraud, or willful injury to the person or property
      of another.’ (Civ. Code, § 1668.) Under these cir-
      cumstances, such waivers are unconscionable under
      California law and should not be enforced.”

Id. at 983 (alteration in Shroyer) (quoting Discover Bank, 113
P.3d at 1100).

   Applying Discover Bank’s test, we concluded that Cingu-
lar’s class action waiver was unconscionable under California
law because the agreement was of the type that Discover Bank
foreclosed—a contract of adhesion in a setting involving dis-
putes between contracting parties that predictably concerned
only small amounts of damages and where, according to the
Shroyer plaintiffs, the party with the superior bargaining
power (i.e., the wireless provider) had carried out a fraudulent
scheme deliberately to cheat large numbers of consumers out
of individually small sums of money. Id. at 983-84. We
observed that in Discover Bank the California Supreme Court
had been concerned “that when the potential for individual
gain is small, very few plaintiffs, if any, will pursue individ-
ual arbitration or litigation, which greatly reduces the aggre-
gate liability a company faces when it has exacted small sums
                   LOWDEN v. T-MOBILE USA                     853
from millions of consumers.” Id. at 986 (emphasis omitted).
As in T-Mobile’s present case, the invalidating of Cingular’s
class action waiver rendered the entire arbitration agreement
unenforceable. Id. at 986-87.

   Having decided that the agreement was unenforceable
under California law, we next considered Cingular’s argument
that the FAA preempted California law. Cingular had argued
that Discover Bank’s unconscionability provisions subjected
arbitration agreements to special scrutiny. Id. at 987. The
United States Supreme Court had previously observed that
“ ‘[a] state-law principle that takes its meaning precisely from
the fact that a contract to arbitrate is at issue does not comport
with th[e] requirement of § 2’ and is preempted.” Id. (first
alteration in original) (quoting Perry v. Thomas, 482 U.S.
483, 492 n.9 (1987)). We held, however, that such a principle
was not at issue in Shroyer; rather, the California principle of
unconscionability was a generally applicable contract defense,
which could be applied to invalidate an arbitration agreement
without contravening the FAA. Id. at 987-88. We further
commented that we had previously rejected Cingular’s argu-
ment that California’s unconscionability doctrine was pre-
empted by the FAA and that Discover Bank’s statement that
the doctrine applied to contracts generally, not only to arbitra-
tion agreements, affirmed that California law on this point did
not contravene the FAA. Id. at 988.

   We rejected Cingular’s argument that application of Cali-
fornia’s unconscionability principles would obstruct Con-
gress’s purposes in enacting the FAA. Congress’s primary
purpose behind the FAA requires that we enforce the terms of
arbitration agreements like other contracts, not more so. Id. at
989. We reasoned: “To hold that California unconscionability
law may be applied only to invalidate a class action waiver,
but not a class arbitration waiver, would place arbitration
agreements on a different footing than other contracts, in
direct contravention of th[e] principal purpose of the [FAA].”
Id. at 990 (citing Scott, 161 P.3d at 1008 (“Congress simply
854                 LOWDEN v. T-MOBILE USA
requires us to put arbitration clauses on the same footing as
other contracts, not make them the special favorites of the
law.”)).

   [7] We also rejected Cingular’s suggestions that the FAA
implicitly exalted individual arbitration but disfavored class
arbitration, id. at 990, and that class arbitration would reduce
arbitration’s alleged general efficiency, id. at 990-92. We con-
cluded that the FAA did not preempt California unconsciona-
bility principles from invalidating Cingular’s class action
waiver and therefore its arbitration agreement. Id. at 993.

   [8] The invalid class action waiver in Shroyer is, in all
material respects, identical to T-Mobile’s waiver. As in
Shroyer, T-Mobile’s class action waiver lies within a contract
of adhesion governing claims likely to concern only small
sums of money that the defendant is alleged to have fraudu-
lently obtained from the plaintiffs. Most significantly, the
Washington State Supreme Court grounded its unconsciona-
bility determination in Scott in concerns almost identical to
those underpinning California’s unconscionability determina-
tion in Discover Bank. Thus Shroyer’s conclusion with
respect to California unconscionability law applies equally
here: Just as the FAA does not preempt California’s uncons-
cionability law, it does not preempt Washington’s uncons-
cionability law. As we explained in Shroyer, the California
Supreme Court sought in Discover Bank to remedy its con-
cern that, when the potential for individual gain is small, few
if any plaintiffs will pursue either individual arbitration or liti-
gation, thereby greatly reducing the aggregate liability a com-
pany faces when it has exacted small sums from millions.
Those are the same concerns that underlie the Washington
State Supreme Court’s holding in Scott.

   We reject T-Mobile’s argument that Scott’s unconsciona-
bility principles do not apply in all contracts—in other words,
that they treat arbitration agreements differently than other
contracts. In Shroyer, we rejected Cingular’s analogous argu-
                     LOWDEN v. T-MOBILE USA                         855
ment, notwithstanding the California Supreme Court’s recog-
nition in Discover Bank that it was not holding that all class
action waivers are necessarily unconscionable, but rather only
those in certain circumstances. As Shroyer’s holding suggests,
Scott’s unconscionability principles embody grounds to
revoke any contract, not just arbitration agreements. The Scott
principles apply equally to a contract that permits only indi-
vidual, not aggregate, litigation in court. Stated another way,
the Scott holding targets not the arbitration context, but rather
the class action waiver, which the Washington State Supreme
Court has determined would deprive Washington consumers
of a right generally applicable to arbitration and litigation
contracts alike and which only happens to be within an arbi-
tration agreement in this case.3

   Finally, T-Mobile’s claim, in essence, that the FAA
requires a state to enforce a class action waiver merely
because it lies within an arbitration agreement—whereas a
state would be free to find the same waiver to be invalid in
the litigation context—contravenes the FAA’s mandate of an
“equal footing” between arbitration and other forms of dispute
resolution. See Buckeye Check Cashing, Inc. v. Cardegna,
546 U.S. 440, 443 (2006) (“Section 2 embodies the national
policy favoring arbitration and places arbitration agreements
on equal footing with all other contracts . . . .”). The FAA pro-
scribes states from giving arbitration special treatment,
whether it be positive or negative.

  AFFIRMED.
  3
   We also decline T-Mobile’s invitation to follow the Third Circuit’s
holding in Gay v. CreditInform, No. 06-4036 2007 U.S. App. LEXIS
29302 (3d Cir. Dec. 19, 2007). Unlike the Third Circuit’s conclusion as
to the applicable state law in Gay, we determine that the Washington
Supreme Court in Scott does not hold “that an agreement to arbitrate may
be unconscionable simply because it is an agreement to arbitrate.” Id. at
*63.