Gorden v. Lloyd Ward & Associates, PC
323 P.3d 1074
Wash. Ct. App.2014Background
- Two Washington residents (Gorden and Miller) signed LWG’s electronic client services/retainer agreement for debt-settlement services after responding to online solicitations; payments were made from Washington but LWG performed services from Texas.
- The agreement contained Texas choice-of-law and Texas venue/jurisdiction clauses and an arbitration provision specifying arbitration in Collin County, Texas under AAA rules; no attorney explained these provisions or advised clients of the arbitration consequences.
- Plaintiffs allege LWG kept client payments as fees and failed to pay creditors, harming their finances and credit; they sued in Washington for violations of the Washington Debt Adjusting Act (DAA) and Consumer Protection Act (CPA) and sought injunctive relief and class relief.
- LWG moved to compel arbitration and to dismiss for lack of personal jurisdiction; the trial court denied both motions, finding the arbitration clause unconscionable and that Washington courts had jurisdiction. The trial court entered a CR 54(b) judgment and LWG appealed.
- LWG later made CR 68 offers of judgment; Gorden accepted and settled, Miller did not, so Miller’s claims (and the jurisdiction/arbitration issues) remained live on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause (delegation/arbitrability) | Clause is procedurally unconscionable because clients received no meaningful disclosure or counseling and had no choice; courts should decide unconscionability. | Agreement governs arbitrability; arbitration is favored and should be compelled; forum/choice provisions are valid. | Court: Arbitration clause procedurally unconscionable (attorney failed to advise; clients lacked informed choice); court decides unconscionability; denial to compel arbitration affirmed. |
| Substantive unconscionability / severability of harsh venue/choice terms | Venue/choice-of-law and arbitration in Texas are one-sided and prohibitively burdensome for Washington consumers. | Even if some terms are harsh, severance could save arbitration clause. | Court: Terms are substantively questionable but procedural unconscionability alone voids clause; severance does not cure the procedural defect. |
| Mootness after defendant’s offer of judgment | Plaintiffs: at least Miller remains; settlement by one class representative does not moot other plaintiffs or the class question. | LWG: offers of judgment to named plaintiffs render appeal moot (relying on Genesis). | Court: Gorden’s claims are moot after acceptance, but Miller did not accept; Genesis inapplicable; Miller’s claims survive and appeal is not moot. |
| Personal jurisdiction over Texas-based defendant | Plaintiffs: LWG purposefully availed itself of Washington market via internet solicitation, contracts, and receipt of payments; jurisdiction is proper under long-arm and due process. | Defendant: Key contract performance and contacts occurred in Texas; Washington lacks minimum contacts. | Court: Prima facie showing of jurisdiction satisfied (general and specific jurisdiction available); denial of dismissal affirmed. |
Key Cases Cited
- Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (U.S. 2013) (addressing effect of defendant’s offer of judgment on justiciability of collective/class claims)
- Gandee v. LDL Freedom Enters., Inc., 176 Wn.2d 598 (Wash. 2013) (arbitration agreements enforceable except on grounds for contract revocation; burden on party avoiding arbitration)
- Brown v. MHN Gov’t Servs., Inc., 178 Wn.2d 258 (Wash. 2013) (court decides unconscionability absent clear-and-unmistakable delegation to arbitrator)
- Adler v. Fred Lind Manor, 153 Wn.2d 331 (Wash. 2004) (either procedural or substantive unconscionability suffices to void a contract)
- Data Disc, Inc. v. Sys. Tech. Assocs., 557 F.2d 1280 (9th Cir. 1977) (prima facie showing of jurisdiction required when ruling on jurisdiction based on affidavits)
- Burger King Corp. v. Rudzewicz, 471 U.S. 462 (U.S. 1985) (minimum contacts and purposeful availment principles for personal jurisdiction)