455 F. App'x 156
3rd Cir.2011Background
- TaxMasters sought to compel arbitration based on an Engagement Agreement containing an arbitration clause.
- The engagement followed a phone consultation where the customer allegedly agrees to full contract price without always receiving the clause disclosure.
- Antkowiak paid a down payment and two additional $500 installments; later stopped after TaxMasters failed to work on his case.
- District Court held the arbitration clause unconscionable under Pennsylvania law due to a totality-of-the-circumstances bundling of four terms.
- Court of Appeals vacates and remands, noting Concepcion supersedes prior concerns about class-action waiver and requires factual development on costs.
- Issues include procedural unconscionability (adhesion contract), substantive unconscionability (including costs and class waiver), and severability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability | Antkowiak, adhesion contract and nondisclosure of terms | TaxMasters contends no procedural defect beyond standard contract terms | Arbitration clause procedurally unconscionable; remand for full factual record |
| Substantive unconscionability and class waiver | Class-action waiver and one-sided cost shifting render arbitration unfair | Concepcion preempts broad limitations on class arbitration and costs are not per se unconscionable | Remand to reassess substantive unconscionability in light of Concepcion |
| Costs provision and severability | Bear all costs prevents vindication of rights | Costs provision legitimate unless it defeats access to forum | Remand to determine projected costs and payability; consider severability if unconscionable |
Key Cases Cited
- AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) (preempts state-law defenses against arbitration clause enforceability)
- Green Tree Fin. Corp.-Ala. v. Randolph, 531 U.S. 79 (Supreme Court 2000) (arbitration costs can affect enforceability; unconscionability defenses)
- Parilla v. IAP Worldwide Servs. VI, Inc., 368 F.3d 269 (3d Cir. 2004) (expense provisions and severability analysis in unconscionability)
- Nino v. Jewelry Exch., Inc., 609 F.3d 191 (3d Cir. 2010) (scope of costs and severability in arbitration agreements)
- Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (Supreme Court 2006) (questions of contract validity and arbitrability; issues decided by arbitrator)
- Witmer v. Exxon Corp., 434 A.2d 1222 (Pa. Super. Ct. 1992) (procedural unconscionability in Pennsylvania)
- Concepcion, 131 S. Ct. 1740 (2011) (broad preemption of state law defenses to arbitration)