Cyrus Dugger

Trial Lawyers for Public Justice: Access to Justice Victory on Mandatory Arbitration Before Ninth Circuit En Banc

From Trial Lawyers for Public Justice :

I have more great news to share — our Access to Justice Campaign has just won a major victory against unfair mandatory arbitration before the en banc U.S Court of Appeals for the Ninth Circuit. The 8-judge majority in Nagrampa v. MailCoups, Inc., held that a one-woman franchise operator in California cannot be forced to go to Boston to challenge a national company’s mandatory arbitration clause before an arbitrator in its home town. Instead, charges that the mandatory arbitration clause is unfair must be heard locally in court!

MailCoups’ arbitration clause would have required franchise operator Connie Nagrampa to travel from California to Boston just to assert her claims that the company cheated her and defend herself against the company. The court ruled that the arbitration clause is unconscionable and unenforceable under California law, overturning an earlier decision by a three-judge panel of the court and clearing the way for Nagrampa’s lawsuit against the direct-mail coupon company MailCoups, Inc.

“This decision marks a victory for fairness and common sense,” said former TLPJ Power-Cotchett Attorney Michael Quirk, who briefed and argued the case while at TLPJ and is now at Philadelphia’s Williams Cuker Berezofsky. “Under the court’s prior decision, Ms. Nagrampa would have to travel 3,000 miles just to challenge the contract term that required her to travel 3,000 miles. If that were the law, then companies could run roughshod over the rights of consumers, workers, and franchise owners like Ms. Nagrampa.”

In striking down the clause as unenforceable, the Ninth Circuit held that the arbitration clause — which was non-negotiable and appeared on the 25th page of a 30-page contract — was “unconscionable” and illegal partly because (1) “MailCoups had overwhelming bargaining power, drafted the contract, and presented it to Nagrampa on a take-it-or-leave-it basis”; (2) the clause was “clearly one-sided” since it required Nagrampa to submit her claims to arbitration, but reserved the corporation’s right to go to court; and (3) the clause was “unduly oppressive and harsh” given the respective bargaining positions of the parties, particularly because it “would require a one-woman franchisee who operates from her home to fly across the country to arbitrate a contract signed and performed in California.”

The Ninth Circuit’s decision is especially important because it makes clear that the question of whether an arbitration clause is unconscionable must be decided by a court, even if some of the factors that make the clause unconscionable also apply to the contract as a whole.

Arthur Bryant
Executive Director
Trial Lawyers for Public Justice
& The TLPJ Foundation

Posted at 11:30 AM, Dec 15, 2006 in Permalink | Comments (0) | TrackBack (0)