Vigil v. Sears Nat. Bank

[David A. Szwak]

Customer filed putative class action alleging that retailer and bank improperly levied penalties for late payment on customer's charge card. On defendants' motion to stay action in favor of arbitration, the District Court, Berrigan, C.J., held that: (1) customer entered into written agreement to arbitrate with either credit card company or retailer; (2) arbitration clause was enforceable; and (3) arbitration clause was neither outside reasonable expectation of customer nor unconscionable. Vigil v. Sears Nat. Bank, 205 F.Supp.2d 566, E.D.La., Feb 19, 2002.

Arbitration clause in credit card agreement was neither outside reasonable expectation of customer nor unconscionable; even though contract was one of adhesion and arbitration clause eliminated customer's right to jury trial and her right to bring class action, such clauses were routinely included in consumer contracts, arbitration clause was not outside customer's reasonable expectation, and there was strong presumption in favor of affirming arbitration clauses. Id. "Procedural or process unconscionability" is concerned with unfair surprise; procedural unconscionability focuses on those factors bearing upon the real and voluntary meeting of the minds of the contracting party and, as such, it bears a strong resemblance to fraud and duress. Id. "Substantive unconscionability" concerns the actual terms of a contract and examines the relative fairness of the obligations assumed; indicative of substantive unconscionability are contract terms so one sided as to oppress or unfairly surprise an innocent party, an overall imbalance, in the obligations and rights imposed by the bargain, and significant cost-price disparity. Id. Substantive unconscionability is concerned about the actual terms of the contract and examines the relative fairness of the obligations assumed. Id.