Procedural Posture

Plaintiffs, cellular telephone service subscribers, challenged defendant provider’s practices of charging a termination fee and of selling locked handsets that a subscriber could not use when switching carriers. The Superior Court of Alameda County, California, denied the provider’s motion to compel arbitration under the service agreements. The provider brought consolidated appeals. The parties consulted with several counsel which included labor attorney and business counsel.

Overview

The provider argued that there was no surprise, and thus no procedural unconscionability, in the arbitration agreement and class action waiver contained in its service agreements. The reviewing court agreed that there was no surprise but held that the adhesive nature of the service agreement established a minimal degree of procedural unconscionability, despite the availability of market alternatives. Courts were not obligated to enforce highly unfair provisions that undermined important public policies simply because there was some degree of consumer choice in the market. Applying a sliding scale analysis, the court found that the evidence of substantive unconscionability was strong enough to tip the scale and render the arbitration provision unconscionable under Civ. Code, § 1670.5. A class action waiver was unconscionable under California law when the waiver was found in a consumer contract of adhesion in a setting in which disputes predictably involved small amounts of damages and when it was alleged that the party with the superior bargaining power had carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money.

Outcome

The court affirmed the trial court’s order denying the motion to compel arbitration.

Procedural Posture

Plaintiff lessor filed suit against defendant lessees, alleging that the lessees breached the terms of a mining lease by failing to make certain improvements on the property and by failing to mine the property. The Superior Court of Calaveras County (California) entered judgment for the lessor, finding that the lessees never performed under the lease, that they repudiated the lease in 1937, and that they refused to perform any lease provisions.

Overview

The lease was executed on September 21, 1937. The lease required the lessees to pay royalties for the extracted minerals and to make certain improvements. The lessees claimed, among other things, that the lessee’s suit was premature because performance under the lease was not required until 1939. The court found that (1) the lease clearly required the lessees’ to enter into immediate possession of the property and to begin operations; (2) the lessees’ failure to perform its promises constituted a partial breach of the lease in 1937; (3) this breach was material (3) the evidence supported the trial court’s finding that the lease was repudiated by the lessees in 1937; (5) the lessor was entitled to recover the reasonable cost of the improvements and the evidence supported the trial court’s determination of the amount of these damages; (6) for the lessees’ failure to mine the property, the lessors were entitled to recover an amount equal to the amount of royalty which the lessor would have received had the lessees operated in accordance with the lease; and (7) the lessor established a prima facie case for the recovery of its royalty damages, which the lessees failed to rebut.

Outcome

The judgment was affirmed.