James Pendergast appeals a district court order that compelled arbitration in his case against Sprint Solutions, Inc. and Sprint Spectrum, L.P., following his claims of improper roaming fees charged while within Sprint's coverage areas. The district court upheld the validity of the arbitration clause and class action waiver in Pendergast's service contract, stating they barred the class action. On appeal, Pendergast does not dispute the arbitration clause but argues that the class action waiver is procedurally and substantively unconscionable under Florida law. He contends that since the contract asserts the arbitration clause and class action waiver are non-severable, the unenforceability of the class action waiver invalidates the arbitration clause. The Eleventh Circuit, recognizing conflicting rulings from Florida's intermediate appellate courts, decides to certify specific legal questions to the Florida Supreme Court. The factual background indicates that Pendergast entered a two-year service contract with Sprint on August 2, 2001, purchasing a Samsung SCH-8500 phone, with the Terms and Conditions provided in the packaging and available online. His initial invoice also referenced the Terms and Conditions, which allowed Sprint to change the agreement terms, with acceptance implied through continued use of the service.
Plaintiff had a 14-day window post-activation of his Sprint phone to terminate service without penalty, as outlined in the May 2001 Terms and Conditions. These conditions included limitations on termination and potential fees for changing service plans. Additionally, the Terms contained a clause that excluded Sprint from liability for incidental, consequential, punitive, or special damages related to service failures. An arbitration clause mandated that most disputes, regardless of legal theory, would be resolved through arbitration governed by the Federal Arbitration Act, without a class action waiver included in this version.
The litigation has assumed that the Terms effective May 22, 2001 were provided to Plaintiff with his phone purchase. However, Sprint indicated that the box might have included Terms effective May 1, 2000, which lacked an arbitration clause but included a class action waiver. Plaintiff asserted that he could not switch carriers without rendering his phones non-functional, but Sprint countered that he could sell the devices to others who could activate them on the Sprint network.
On February 24, 2003, Plaintiff activated a new Samsung SPH-A460 phone at a Sprint store, retaining his original account and phone number. The user guide for this phone included Sprint's Terms and Conditions, but it is unclear which version was provided.
The packaging of the Samsung SPH-A460 phone indicated it included Sprint's Terms and Conditions. On July 2, 2005, the Plaintiff signed a two-year PCS Advantage Agreement with Sprint and purchased a Samsung PM-A740 phone, activating a second line. Sprint subsidizes phone prices, but the extent of the subsidy for the Plaintiff's device is unclear, though he acknowledged a discount. The PM-A740's packaging contained the user guide and Sprint's Terms and Conditions effective June 30, 2004. The Plaintiff was not notified of these Terms when they took effect but received a copy upon expanding his account.
The Terms state acceptance occurs through various actions, including using or paying for services. They outline that Sprint can amend the Agreement with notice, with changes effective upon publishing. The Plaintiff could terminate the agreement without fees within 30 days of material changes. Additionally, the Terms limit Sprint's liability for various damages and include an arbitration clause for disputes, excluding small claims court cases.
The June 2004 Terms and Conditions introduced a mandatory arbitration clause, requiring both parties to arbitrate all claims related to the agreement instead of pursuing legal action in court. This clause is governed by the Federal Arbitration Act, which supersedes state laws regarding arbitration eligibility. However, claims can still be brought in small claims court or before specific regulatory bodies. The agreement prohibits joining claims with others or pursuing class-action resolutions, and any claims must be pursued individually. If the arbitration provision is deemed inapplicable, a waiver of the right to a jury trial is agreed upon. Each party is responsible for their arbitration costs, although the arbitrator can allocate costs as deemed appropriate. Should a party initiate an action that should be arbitrated, they may be liable for the other party's legal costs in enforcing arbitration. If any part of this arbitration section is found invalid, the rest remains effective.
The Plaintiff began using a second phone number on July 2, 2005, and signed a two-year Advantage Agreement that explicitly referenced the arbitration clause in Sprint’s Terms and Conditions. By signing, the Plaintiff confirmed they had read and accepted all terms, including the mandatory arbitration provision, which requires arbitration for any disputes, barring small claims court matters. The Advantage Agreement also outlines that it constitutes a binding legal agreement, encompassing specific service plan terms and the latest Terms and Conditions, which were made available to the Plaintiff.
Return policy stipulates the return of a complete, undamaged PCS phone with original proof of purchase within 14 days (30 days for California residents). Refunds will be issued via check or charge-card credit, covering any activation fees without imposing an Early Termination Fee. Users remain liable for all charges incurred before deactivation.
By signing the agreement, the customer confirms the accuracy of the information provided, agrees to all terms, and affirms authority if signing on behalf of a business. The contract includes a binding arbitration provision.
From July 1-13, 2005, the plaintiff's second phone number was 786-859-9624, which changed to 312-545-8378 on July 13, 2005. The plaintiff's August 1, 2005 invoice indicated that all three numbers were billed under a single account (No. 0071106751-0). The invoice noted that charges might reflect multiple months of service due to the addition of the second line.
On July 5, 2006, the plaintiff activated an LG VI-5225 phone on the first line (786-859-6129), with related Terms and Conditions provided separately from the user guide. By July 10, 2006, the second line became inactive, reverting the account to a single line. From 2001 to 2006, the plaintiff used three different phones for the first line and one additional line during the latter period. Each new phone included the current Terms and Conditions, and invoices confirmed availability online.
In December 2006, an invoice notified the plaintiff of upcoming changes to Sprint’s Terms and Conditions effective January 1, 2007. The revised terms were accessible on Sprint’s website, and the plaintiff remained a customer until January 2008.
The January 2007 Terms and Conditions defined Sprint's 'Service' to encompass the offers, rate plans, options, wireless services, or devices associated with a subscriber's account. The December 2, 2006 invoice noted the availability of the most current Terms and Conditions on Sprint’s website, but did not specify where changes could be found. These Terms and Conditions applied to all standard wireless services and any other referenced services, asserting that acceptance occurs through various actions, such as signing a contract or using the services. Sprint retained the unilateral right to amend the agreement, allowing subscribers to terminate their contracts within 30 days of material changes without incurring an Early Termination Fee, provided they notified Sprint of their intent to cancel. Additionally, the 2007 Terms included a limitation of liability clause, capping Sprint's financial responsibility for damages to the service charges for the affected period and excluding liability for any incidental or consequential damages. The arbitration provisions were expanded, allowing qualifying claims to be pursued in small claims court, while all other disputes required arbitration, with the arbitrator bound to the terms of the Agreement and able to award similar damages and attorney's fees as a court would.
The January 2007 Terms and Conditions included a class action waiver, appearing both within the arbitration clause and as a separate stand-alone waiver. Under the 'Dispute Resolution' section, it stipulated that disputes must first be communicated in writing, followed by arbitration rather than court proceedings, with the arbitration being non-classwide and solely between the parties involved. If the class action waiver were found unenforceable, disputes would then proceed in court. Exceptions to arbitration included small claims court filings and claims to government agencies. A subsequent notice reiterated the class action waiver, stating that both parties waived the right to pursue classwide claims. Additionally, the Terms waived the right to a jury trial where permitted by law. Sprint committed to covering arbitration fees above $125 for claims under $1,000. On December 2, 2007, Sprint notified the Plaintiff of upcoming amendments to the Terms effective January 1, 2008, which were not materially different from the previous version. The Terms specified acceptance conditions, including use of services or acknowledgment of the agreement through various means.
To decline acceptance of the Agreement, a customer must refrain from specified actions. Sprint reserves the right to modify the Agreement unilaterally, while customers can terminate their contract within 30 days of a material change that adversely affects services. Notification of material changes will be provided, and failure to cancel within the 30-day period will result in an Early Termination Fee. The January 2008 Terms and Conditions limit Sprint's liability for damages to the amount corresponding to service charges during the affected period, excluding any incidental, consequential, punitive, or special damages. Additionally, the updated arbitration provisions mandate that disputes be resolved through arbitration rather than litigation, prohibit class action claims, and allow for the arbitrator to award relief as permitted by law. A plaintiff, who was a Sprint customer until January 20, 2008, claims Sprint charged improper roaming fees while he was within its coverage area due to network limitations that led to calls being routed through other carriers. He has filed a lawsuit alleging violations of the Florida Deceptive and Unfair Trade Practices Act, breach of contract, and negligent misrepresentation.
Plaintiff seeks approximately $20.00 in monetary damages and requests both declaratory and injunctive relief based on alleged improper roaming charges from Sprint. He first became aware of these charges during the summer of 2007 when reviewing past invoices, which revealed 39 roaming minutes charged on his original phone number between July 1, 2004, and June 30, 2006. Plaintiff asserts that he cannot afford legal representation to pursue his claims without the option of a class action due to the risks and costs involved.
Sprint filed a motion to compel arbitration, citing arbitration and class-action waiver clauses in its January 1, 2008 Terms and Conditions as barring the lawsuit. The Plaintiff contends that while he does not argue the arbitration clause is unconscionable, the class action waiver is unconscionable and unenforceable. The district court acknowledged that the enforceability of the class action waiver is a critical issue that cannot be separated from the arbitration clause. It was agreed that Florida law governs the enforceability of the class action waiver.
On January 13, 2009, after a hearing, the district court sided with Sprint, compelling arbitration and dismissing the case, determining that under Florida law, Plaintiff needed to demonstrate both procedural and substantive unconscionability for the class action waiver to be deemed unenforceable. The court found no procedural unconscionability but did not address substantive unconscionability. Plaintiff subsequently filed a timely appeal. The appellate court will apply Florida law to review the district court's decision, and it will examine the enforceability of the class action waiver under the standards set by the relevant Florida appellate court decisions.
The court is tasked with determining the appropriate legal standard under Florida law regarding unconscionability in the context of a class action waiver. It is established that federal courts must utilize various legal sources, including Restatements of Law and law review articles, to predict how state courts are likely to rule. In cases of uncertainty, federal courts should certify questions to state supreme courts to avoid speculative interpretations.
The primary issue on appeal is whether Florida law necessitates a plaintiff to demonstrate both procedural and substantive unconscionability for a class action waiver to be deemed unenforceable. The plaintiff contends that Florida's unconscionability standard is flexible and may not require both elements, suggesting that a significant level of procedural unconscionability could suffice with minimal substantive unconscionability. However, the district court interpreted Florida law as mandating both elements be proven, which is supported by precedents from the Florida Third District Court of Appeal. The validity of the non-severable arbitration agreement, which includes the class action waiver, falls under the Federal Arbitration Act, which allows for challenges based on traditional contract defenses such as unconscionability. The court acknowledges that the plaintiff's defense of unconscionability applies to Sprint’s motion to compel arbitration due to the intertwined nature of the arbitration clause and the class action waiver.
Florida courts require plaintiffs in commercial lease disputes to demonstrate both procedural and substantive unconscionability. This requirement is supported by multiple appellate decisions such as Golden v. Mobil Oil Corp., Bland v. Health Care, and Fonte v. AT&T Wireless Services, which affirm that both forms of unconscionability must be established for a court to refuse enforcement of a contract or clause. However, there is inconsistency in how courts apply this standard. Some courts advocate for a simultaneous balancing approach, while others assess procedural and substantive unconscionability separately, allowing for dismissal of one prong without evaluating the other if one is not established. The prevailing view indicates that while both forms should be present, they do not need to exist in equal measure; a "sliding scale" may apply where greater substantive oppression reduces the need for procedural evidence. The court in question adopts a strict independent assessment of both prongs, stating that if procedural unconscionability is absent, substantive unconscionability need not be considered. This position is at odds with the notion that both forms must always be shown, which the author of the opinion finds illogical and inconsistent with previous rulings.
In *Golden v. Mobil Oil Corp.*, the court noted a conflict in Florida law regarding the analytical approach for assessing procedural and substantive unconscionability. It highlighted that Florida's Third District Court of Appeal has rejected a strict procedural-substantive analysis, leading to uncertainty in the applicable legal standards. To evaluate procedural unconscionability, courts must consider:
1. The manner of contract formation.
2. The relative bargaining power of the parties and the meaningful choice available to the complaining party.
3. Presentation of terms on a "take-it-or-leave-it" basis.
4. The ability of the complaining party to understand the contract terms.
The court in *Golden* concluded that it did not need to determine procedural unconscionability since the limitation of liability clause was not substantively unconscionable. It noted that various Florida appellate decisions have adopted differing analyses, contributing to the legal ambiguity. The court emphasized that if state law evolves or clarifies inconsistencies with prior rulings, the precedent rule does not bind them. The central question in procedural unconscionability is whether a consumer lacked meaningful choice in accepting contract terms. The district court found that the plaintiff had meaningful choice regarding Sprint’s class action waiver, as he was informed of the waiver at the contract's signing, had the option to reject it, could switch carriers, and was not significantly hindered by costs. The plaintiff's appeal primarily relied on the *Powertel* case, where an arbitration clause was deemed invalid.
The Florida appellate court found the arbitration provision in Powertel's contract to be unconscionable due to two main factors: the plaintiff had no meaningful choice and canceling the contract would result in the loss of equipment that was only compatible with Powertel's network, as well as the inability to transfer the phone number to another provider. The court noted that Powertel's notification of the revised terms was inadequate, citing issues such as small print, lack of clarity regarding changes, and no indication of new provisions, which likely left customers unaware of the arbitration clause. In contrast, Florida's Fourth District Court of Appeal in Fonte v. AT&T Wireless Services ruled that the arbitration clause in AT&T’s contract was not procedurally unconscionable, as it was included in the original contract and customers had received multiple notifications to review the terms. This difference in implementation was crucial, as customers in Fonte had the option to choose another carrier and had not invested in AT&T equipment prior. The distinction between the two cases highlights the importance of how contract modifications are presented to consumers, with several other Florida appellate decisions also emphasizing the specific facts surrounding procedural unconscionability.
A contract being an adhesion contract is a relevant factor in assessing procedural unconscionability under Florida law but does not solely determine the outcome. The District Court of Appeal upheld a trial court's finding that an arbitration clause in an automobile purchase contract was not procedurally unconscionable, noting that the clause was presented in the same typeface as the rest of the agreement and there was no indication that the dealers obstructed the customer's understanding. The court emphasized that the plaintiff could not evade her contractual obligations simply due to not reviewing the agreement's terms.
In contrast, the Third District Court of Appeal found a rent escalation clause in a condominium lease to be procedurally unconscionable, citing a lack of negotiation by individual owners and the absence of options to opt out of the contract. Similarly, in another case, the Second District Court deemed rental price increases for mobile home tenants unconscionable due to the imbalance of bargaining power stemming from logistical difficulties in relocating mobile homes. The Third District Court also ruled an arbitration clause unconscionable when it was presented in a language unfamiliar to the plaintiffs, who were not informed of its inclusion.
The circumstances of the current case differ from these precedents, particularly as the arbitration clause was part of the plaintiff's 2005 Advantage Agreement and was clearly referenced in Sprint's 2004 Terms and Conditions, which included a class action waiver in understandable terms. This waiver continued in subsequent Terms and Conditions, with Sprint providing reminders through invoices and its website.
Plaintiff contends that Sprint altered its Terms and Conditions from 2001 to 2008 without adequately notifying him of significant additions, such as the class action waiver introduced in 2004. He argues that his initial 2001 contract effectively trapped him with Sprint since his phone was incompatible with other carriers. However, he fails to provide evidence regarding the purchase price or 2008 value of his initial phone and admits he never attempted to terminate his plan or sell the device, deeming such details irrelevant to his unconscionability claim.
It is established that Plaintiff could have canceled his second phone line within 14 days of the 2005 Advantage Agreement without penalties and with a full refund. Despite his claim of a lack of alternatives, evidence shows that TracFone and Virgin Mobile offered services without class action waivers in his area at that time. Sprint argues that minor service differences do not negate the availability of these alternatives and that Florida law does not require them to be perfect substitutes. The court noted that Plaintiff could have avoided the contract due to the 14-day cancellation window and could cancel without penalty whenever Sprint amended its terms. Although the class action and arbitration clauses were prominently highlighted, Plaintiff did not provide evidence of his phone costs or their value. He also acknowledged that he changed phone models frequently and that his number was portable to other carriers.
Review of the Terms and Conditions from 2005 to 2008 indicates that the arbitration and class action waiver clauses are prominently displayed and easy to understand, suggesting that the Plaintiff, who claimed to have read the terms, should have noticed them. This situation contrasts with Florida appellate cases like Powertel, Murphy, and Hialeah, where unconscionable clauses were hidden in small print or presented in a foreign language. Despite Sprint's frequent updates to its Terms and Conditions without highlighting changes for subscribers, the determination of whether Sprint's contract is procedurally unconscionable remains unclear due to the ambiguous state of Florida law and the prevalence of similar claims. Consequently, the matter should be certified to the Florida Supreme Court for clarification.
On the issue of substantive unconscionability, the Plaintiff argues that the class action waiver in Sprint's Terms renders the agreement fundamentally unfair. Under Florida law, substantive unconscionability assesses whether contract terms are unreasonable. The Plaintiff contends that without the option to pursue a class action, the case for improper roaming fees is too minor to warrant individual litigation, making it difficult to find legal representation. This effectively undermines his ability to seek recourse, raising concerns about fairness in the contractual terms. While Florida courts have upheld limits on remedies in commercial lease agreements, the distinction between such agreements and standard form consumer contracts complicates the applicability of precedents like Golden to this situation.
An arbitration clause in contracts may be deemed substantively unconscionable if it removes significant legal remedies for consumers. In **Powertel**, the Florida First District Court of Appeal identified several problematic aspects: the clause limited recovery to actual damages, excluded punitive damages, barred class actions, and prevented arbitrators from granting injunctive or declaratory relief, thus effectively waiving important statutory remedies under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). The plaintiff argued that without the option to litigate as a class, the potential for discretionary attorney's fees under FDUTPA would not incentivize attorneys to take on such claims.
Similarly, in **Bellsouth Mobility**, the Florida Fourth District Court of Appeal found that the arbitration clause was also substantively unconscionable due to its limitations on liability and the removal of class action rights, which could be essential for small claims with common legal questions. Although Florida courts have upheld arbitration agreements under Georgia and federal law, the **Dale v. Comcast** case demonstrated that a class action waiver could be considered unconscionable based on specific circumstances, distinct from other precedents.
The enforceability of class action waivers in arbitration agreements must be assessed on a case-by-case basis, taking into account the specific facts and circumstances surrounding each case. In this instance, the trial court found the contract to be substantively unconscionable due to insufficient evidentiary support for that ruling. The current case differs materially from previous cases such as Powertel and BellSouth Mobility, leaving the issue of substantive unconscionability unresolved under Florida law. Sprint’s 2007 and 2008 Terms and Conditions allow for recovery of damages and attorney’s fees in arbitration, aligning with Florida law (FDUTPA) that permits such recovery. Additionally, Sprint’s terms do not prevent declaratory or injunctive relief under FDUTPA, unlike the Powertel ruling, which highlighted the waiver of significant statutory remedies as a factor in finding unconscionability.
Plaintiff's reliance on other Florida cases to challenge the class action waiver is flawed, as those cases are either misrepresented or not relevant. Furthermore, Sprint’s dispute resolution options include informal resolutions, small claims court (with filing fees covered), and filing complaints with consumer protection agencies. The only right forfeited by the waiver is the ability to pursue a class action, which is not the sole means to address small claims. Given these circumstances, it is challenging to argue that the agreement is so unfair as to be inherently unconscionable. The Plaintiff's assertion that consumer protection agencies are ineffective due to resource constraints is unsupported by relevant case law, particularly as the Rivera case, which upholds the validity of the arbitration provision, emphasizes the enforcement of consumer protection laws as a mitigating factor against claims of unconscionability.
Arbitration agreements that eliminate class-action relief are enforceable, and plaintiffs have alternative avenues to remedy AT&T's alleged unlawful billing practices. The court finds that the substantive unconscionability of the class action waiver should be certified alongside other Florida law issues. The plaintiff argues that Sprint's “changes to agreement” clause, which allows for amendments to Terms and Conditions with customer notice, is substantively unconscionable under Florida law, which requires mutual consent and new consideration for contract modifications. Although the plaintiff does not dispute that this clause was included in initial contracts from 2001 and 2005, he contends that the modification process lacks substantive fairness. The right to modify was contingent upon the plaintiff's consent through actions like using the phone or making payments, and he could cancel the service within 30 days of changes.
The plaintiff further asserts that the class action waiver is void as it undermines the remedial intentions of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). Citing the case Fonte, the plaintiff notes that although FDUTPA allows class action claims, the court previously determined that such a waiver does not obstruct the statute's remedial purpose. Under Florida law, a contract can be void if it frustrates the aims of a consumer protection statute. The Fonte court concluded that there are other mechanisms for consumer protection beyond class actions, including small claims court and administrative enforcement.
The Fonte court upheld the arbitration clause’s waiver of class actions but found that the clause’s prohibition on attorney's fees undermined the remedial purpose of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), specifically referencing Fla. Stat. 501.2105, which allows for attorney's fee awards. Consequently, the court severed the fee prohibition while maintaining the class action waiver. In contrast, the First District Court of Appeal in S.D.S. Autos, Inc. v. Chrzanowski deemed a class action bar in automobile lease agreements void, indicating that the legislature must clearly state any intention to prevent FDUTPA claims from being arbitrated, which it did not. The S.D.S. Autos court noted that individual claims related to motor vehicle dealer violations often yield small damages, leading to minimal attorney's fee recoveries, which discourages consumers from pursuing legal action. However, the current case allows for the recovery of reasonable attorney's fees under Fla. Stat. 501.2105, as Sprint’s arbitration clause does not prohibit such fees, allowing for recovery similar to court proceedings. Despite this, there remains uncertainty in Florida law regarding the validity of Sprint’s class action waiver. Therefore, the court certifies several questions to the Florida Supreme Court regarding the evaluation of unconscionability and the status of the class action waiver in Sprint's contract. The questions aim to clarify whether procedural and substantive unconscionability must be assessed together or independently, and to ascertain the waiver's validity under Florida law. The complete record and parties' briefs will be provided to assist the Florida Supreme Court in its deliberations.
