On February 7, 2013, the Washington Supreme Court issued an important decision holding that companies cannot strip away consumers’ ability to sue them through the use of grossly one-sided arbitration clauses.
Washington Supreme Court Issues Far-Reaching Unanimous Opinion Protecting Consumers’ Right to Sue in CourtIn the matter of Gandee v. LDL Freedom Enterprises, Inc., et al., No. 07674-6, the Washington Supreme Court affirmed the Pierce County Superior Court’s 2011 decision denying Defendants’ motion to compel arbitration and remanded the matter for further litigation.
An arbitration clause is a contractual provision typically drafted by companies and included in standardized, boilerplate contracts and that requires the parties to resolve any disputes in a private alternative dispute resolution forum instead of open court.
Often, the arbitration clauses go further by limiting the company’s liability, requiring litigation in a remote and inconvenient place, and imposing other harsh terms, such as limited discovery and lax rules of evidence. Quite alarmingly, people are usually completely unaware they are giving away their rights through contracts for everyday consumer items, such as cell phones, computers, or credit cards.
In this particular case, the Defendant debt adjusters had inserted an arbitration clause that drastically fore-shortened the consumers’ statute of limitation from 4 years to 30 days, that required arbitration not in the consumers’ home state of Washington but in Orange County, California, and that threatened that if the consumers sued and lost that they would be responsible for the Defendants’ attorney’s fees and costs.
The Gandees challenged the clause, arguing that its terms were unconscionable and unenforceable under Washington contract law. The trial court agreed and the Defendants appealed.
The Washington Supreme Court found in favor of the Gandees, holding that all of the terms were grossly one-sided and had the purpose and effect of discouraging potential claimants from vindicating their rights due to the heavy cost burden imposed by the clause.
The opinion is even more significant because it comes on the heels of the United States Supreme Court’s decision in AT&T Mobility v. Concepcion, 563 U.S. ___, 131 S. Ct. 1740 (2011), in which that Court invalidated a consumer-friendly California law that held unconscionable arbitration agreements that prohibited class-wide procedures. Gandee represents the Washington Supreme Court’s first opinion addressing Concepcion in the context of a consumer class action.
Specifically, the Washington Supreme Court wrote: “Concepcion provides no basis for preempting our relevant case law nor does it require the enforcement of Freedom’s arbitration clause.”
A copy of the full opinion is available at http://www.thescottlawgroup.com.
“This decision in Gandee represents a momentous victory for consumers in Washington State and throughout the country,” said Mack Mayo, lawyer for the Gandees. “There has been a recent judicial trend all over the nation, in light of federal case law, favoring businesses and arbitration clauses and leaving consumers without recourse.
This opinion shows that when businesses step out of line and try to take advantage of consumers, the courts will be there to protect them and ensure they can vindicate their rights.”
The Scott Law Group and lawyer Matthew Zuchetto also recently obtained a victory in the Ninth Circuit Court of Appeals in Wheeler v. NoteWorld, LLC, in which that Court also affirmed a trial court’s denial of a motion to compel arbitration. A copy of that opinion can be viewed at http://www.thescottlawgroup.com.
The Scott Law Group is engaged in efforts to secure recovery for consumers harmed by unfair and deceptive business practices, including employment disputes, wage and hour cases, debt settlement or mortgage modification scams, or deceptive securities practices. It is a firm devoted to assisting people in joining forces to seek recovery for injuries they have suffered in common.
