Gatton v. T-Mobile Usa, Inc.

152 Cal. App. 4th 571, 61 Cal. Rptr. 3d 344 (2007)

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Nature of the Case

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Facts

Gatton (Ps) are or were subscribers to D's cellular phone services. The contract they signed required mandatory arbitration along with a class action waiver. Ps challenged the fee imposed for termination of the service agreement before its expiration date. Termination of the service before the expiration of the agreement imposed a termination penalty of approximately $200 per telephone. The termination fee was also imposed for nonpayment by the subscriber. The amount of the fee does not vary according to how long the contract has been in effect at the time of termination; it is the same whether the contract has been in effect for several weeks or several months. Ps contend that the flat fee early termination penalty constitutes an unlawful penalty under California law. Other Ps sued against D's practice of installing a locking device in handsets that prevents its subscribers from switching cell phone providers without purchasing a new handset. D moved to compel arbitration. The trial court concluded that the arbitration provision was unconscionable and therefore unenforceable. The trial court held that although the indications of procedural unconscionability were 'not particularly strong,' the arbitration clause was substantively unconscionable because its prohibition on class arbitrations or participation in a class action was against public policy. D appealed.