Higgins v. Superior Court
45 Cal. Rptr. 3d 293 (2006)
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Rule of Law:
An arbitration clause in a contract of adhesion is unenforceable if it is both procedurally unconscionable, due to oppression and surprise in its presentation, and substantively unconscionable, due to overly harsh or one-sided terms. The two elements are evaluated on a sliding scale, where a greater degree of one requires a lesser degree of the other.
Facts:
- In 2004, after the death of their parents, the five Higgins siblings (ages 14-21) moved in with the Leomiti family.
- Producers for the television program 'Extreme Makeover: Home Edition' approached the Higgins siblings to feature their story on the show, which involved renovating the Leomitis' home.
- On February 1, 2005, the television defendants sent a 24-page, single-spaced 'Agreement and Release' to each of the Higgins siblings for their signature.
- The agreement contained a buried arbitration clause in a section titled 'MISCELLANEOUS', which was not highlighted, capitalized, or otherwise made conspicuous.
- On February 5, 2005, following a meeting between the show's producers and the Leomitis, Mrs. Leomiti handed the documents to the Higgins siblings and instructed them to 'flip through the pages and sign'.
- The Higgins siblings signed the complex legal agreement in approximately five to ten minutes without understanding its terms, including the arbitration clause.
- The television show rebuilt the Leomitis' home to include nine bedrooms, one for each Higgins sibling, and paid off the mortgage.
- After the show aired, the Leomitis allegedly forced the Higgins siblings out of the new home.
Procedural Posture:
- The Higgins siblings filed a lawsuit against the television defendants and the Leomitis in a California superior court (trial court).
- The television defendants filed a petition to compel arbitration, citing the arbitration clause in the 'Agreement and Release'.
- The trial court granted the petition to compel arbitration for most claims, finding that the petitioners' challenge was to the entire agreement, not specifically to the arbitration clause, and thus must be decided by an arbitrator.
- The Higgins siblings (petitioners) filed a petition for a writ of mandate with the California Court of Appeal, challenging the trial court's order compelling arbitration.
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Issue:
Is the arbitration clause contained within the 'Agreement and Release' presented to the Higgins siblings unconscionable and therefore unenforceable?
Opinions:
Majority - Rubin, J.
Yes, the arbitration clause is unconscionable and therefore unenforceable. The clause is procedurally unconscionable because it was part of a contract of adhesion presented to unsophisticated and vulnerable parties on a take-it-or-leave-it basis. The element of surprise is high, as the clause was buried in paragraph 69 of a 24-page document under a 'MISCELLANEOUS' heading, without any highlighting or other conspicuous features. The element of oppression is also present, given the vast inequality in bargaining power and the context of the siblings' recent loss. The clause is also substantively unconscionable because it lacks bilaterality; it compels only the petitioners ('I agree') to arbitrate their claims while expressly reserving the producer's right to seek injunctive relief in court. Furthermore, the clause bars only the petitioners from appealing an arbitrator's decision. Applying the sliding scale test, the high degree of substantive unconscionability, combined with the significant procedural unconscionability, renders the arbitration provision unenforceable.
Analysis:
This decision reinforces the application of the unconscionability doctrine as a defense to the enforcement of arbitration clauses, even amidst a strong public policy favoring arbitration. The court's analysis demonstrates that form contracts of adhesion will be closely scrutinized, particularly when they involve vulnerable parties and a significant power imbalance. The ruling emphasizes that procedural tactics, such as burying a clause in a lengthy document without conspicuous markings, combined with substantively one-sided terms, can render an arbitration agreement unenforceable. This case serves as a key precedent for challenging arbitration clauses that lack mutuality and are presented in an oppressive or surprising manner.
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