Ninth Circuit Invalidates Forum Selection and Arbitration Agreement

In Pokorny v. Quixtar, Inc. --- F.3d --- (9th Cir., April 20, 2010), the Ninth Circuit Court of Appeals invalidated a truly over-bearing and one-sided forum selection and arbitration agreement. Here's the summary:

Where plaintiffs who sought protection from allegedly unconscionable agreements were all California residents with no discernable connection to Michigan, district court correctly determined that California law applied. Contractual mandatory alternative dispute resolution provisions were unconscionable under California law. Agreement was procedurally unconscionable since defendant was a large corporation doing business throughout the United States and occupied a superior bargaining position, agreements were presented on a take-it-or-leave-it basis, and defendant failed to provide a full description of the non-binding conciliation and binding arbitration processes--which were subject to unilateral amendment by defendant at any time. Agreement was substantively unconscionable because nonbinding conciliation and binding arbitration processes obligation was not bilateral and gave defendant an unfair advantage, time restrictions for bringing a claim applied only to plaintiffs, plaintiffs were not given a meaningful opportunity to challenge rules of conduct applicable to the nonbinding conciliation process, agreements’ confidentiality provisions prevented plaintiffs from discussing their claims with other potential plaintiffs and discovering relevant precedent to support their claims, arbitrators were trained by defendant, and fee-shifting clause placed plaintiffs at risk of greater costs than they would bear if they were to litigate their claims. District court did not abuse its discretion in declining to sever the unconscionable clauses of agreement.