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Harper v. Ultimo12/5/2003
I.
Laurence and Michaelyn Harper signed two contracts with Frank Ultimo and Ultimo Organization to stabilize the soil and re-level a pool on the Harpers' property. Both contracts were pre-printed. Ultimo rejected the Harpers' attempt to add an "addendum" relating to start and stop dates, integration, and notification. The contracts also contained arbitration provisions, which provided that all controversies under, or related to the contract were to be settled "in accordance with the Uniform Rules for Better Business Bureau Arbitration." The Better Business Bureau's rules were not attached to the contract.
Allegedly, Ultimo broke a sewer pipe in the course of the work, with the result that concrete spread into the sewer system and soil, causing blocks to form in the house's plumbing system. Ultimo also is supposed to have caused considerable damage to the backyard drainage system. And he misled the Harpers as to the amount of work performed.
The Harpers' soon discovered, however, that the arbitration rules of the Better Business Bureau limit the damages and remedies available to dissatisfied customers. Customers cannot obtain compensation for "personal injuries" unless all parties otherwise agree in writing (and, after oral argument and as of the date of this writing, Ultimo has conspicuously not made an offer to so agree). Customer remedies are limited to full or partial refund, completion of work, costs of repair or any out of pocket loss or property damage, but "not to exceed $2,500, caused by provision of the service." Any additional remedies may be awarded "only if" the remedy is already included in a business's precommitment with the Bureau or, as in the case of personal injury claims, if agreed in writing by all parties. Customers are thus precluded under the Better Business Bureau arbitration rules from obtaining tort damages, punitive damages, or any other damages otherwise appropriate in a court of law.
The Harpers filed suit in superior court, alleging tort causes of action for negligence and fraud as well as breach of contract. The suit also seeks punitive damages as well as other tort and contract relief. Ultimo brought a motion to compel arbitration. The trial court denied the motion, concluding that the arbitration clause was unconscionable and therefore would not be enforced.
II.
Seldom do we see cases so readily covered by established case law. The question of the unconscionability of arbitration clauses is analyzed in terms of procedural and substantive unconscionability. Both must be present. (See Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 114 [quoting Sterlen v. Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1533 for the idea that procedural and substantive unconscionability "`must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability'" (original emphasis)].)
Yet while both must be present, they need not be present in equal amounts. There is a sliding scale where the greater the evidence of procedural unconscionability, the less evidence is needed of substantive unconscionability. (See McManus v. CIBC World Markets Corp. (2003) 109 Cal.App.4th 76, 91 ["a sliding scale is invoked whereby the more procedurally oppressive the arbitration clause is, the less evidence of substantive unconscionability is required to warrant the conclusion that the agreements to arbitrate are unenforceable"].) And vice versa. (See Armendariz, supra, 24 Cal.4th at p. 114 ["the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to th
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