The year 2010 should provide some significant developments regarding arbitration enforcement. The Eleventh Circuit began the year with a bang, sending a class action waiver case to the Florida Supreme Court since the federal court determined that the miasma among the intermediate appellate state courts prevented a clear decision. There's a point that's never been made before...

In James Pendergast v. Sprint Nextel Corporation, the Plaintiff complained about approximately $20 in charges incurred between 2004-2006 which he discovered in 2008. The Plaintiff challenged the class action waiver as unconscionable and/or in violation of FDUTPA and, by extension, averred that the arbitration clause is void. There is a non-severability clause.

The 54-page opinion is largely jammed with facts and excerpts from the various versions of Sprint's Terms and Conditions. Suffice it to say, from 2001-2008, there were varying arbitration clauses and class action waivers in the Sprint agreement, which were amended from time to time under a clause which indicated Sprint could do so and the phone customer could consent or withdraw from the contract in 14 days. The customer received the Terms and Conditions on the exterior of boxes as he upgraded phones and/or bought new ones. It was also inside the box, on Sprint's website, and referenced on invoices.

Reading between the lines, the federal court seemed impressed that there was no procedural unconscionability: the Plaintiff had notice of the class action waiver, could have canceled within 14 days, could have used similar but not identical phone providers, and the Plaintiff had not presented evidence as to the alleged cost of the phones if he switched providers. That said, it recognized the ongoing battle among the Florida intermediate appellate courts with the Fourth DCA's home-grown "sliding scale" analysis in Romano vs. the independent analysis of both forms of unconscionability advanced by the Second DCA. We note the Eleventh Circuit politely avoided quoting the Second DCA which "eschews" the Fourth District's approach. We further note that the basis for the "sliding scale" approach, as originally offered in the Romano case, was not as strong as the court suggested (see discussion of "Sliding Scale" on page 47 of this 2005 article).

Substantive unconscionability appears to be an equally difficult decision given the schism among the Florida courts. The Eleventh Circuit held that, while the contract prevented class actions which the Unfair Trade Practice Act specifically provided, the contract did provide other alternatives such as informal resolution, small claims court where Spring paid filing fee (and no lawyer was needed), complaints to government agencies, and individual arbitration which Spring would cover.

Our reading is that the traditionally conservative federal court would likely have upheld compulsion of arbitration and the bar on class actions. At the risk of premature and reckless use of a crystal ball, we expect that the Florida Supreme Court may be more inclined to adopt the Fourth District's approach. We will simply have to watch.