supreme court of florida case no. sc-10-19 · case no. sc-10-19 . james pendergast, lower tribunal...

E a t o n & W o l k P L

1200 Four Seasons Tower • 1441 Brickell Avenue • Miami, Florida 33131 T e l e p h o n e : ( 3 0 5 ) 3 5 0 - 5 1 0 0

SUPREME COURT OF FLORIDA

CASE NO. SC-10-19 JAMES PENDERGAST, Lower Tribunal No. 09-10612 Individually and on behalf of all others similarly situated, Appellant, v. Sprint NEXTEL CORPORATION, Sprint SOLUTIONS, INC., and Sprint SPECTRUM, L.P., Appellees. ___________________________________

APPELLANT’S INITIAL BRIEF

QUESTIONS CERTIFIED FROM THE UNITED STATES ELEVENTH CIRCUIT COURT OF APPEALS

EATON & WOLK PL DOUGLAS F. EATON FBN 129577 WILLIAM G. WOLK FBN 103527

Attorneys for Appellant The Four Seasons Tower 1441 Brickell Avenue, Suite 1200 Miami, Florida 33131 Telephone: (305) 350-5100 Telecopier: (305) 982-0083 Email: [email protected]

mailto:[email protected]�

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E a t o n & W o l k P L 1200 Four Seasons Tower • 1441 Brickell Avenue • Miami, Florida 33131

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TABLE OF CONTENTS Page

I. QUESTIONS OF LAW CERTIFIED BY THE UNITED STATES ELEVENTH CIRCUIT COURT OF APPEAL .........................................1

II. STATEMENT OF THE CASE ..................................................................1

III. STATEMENT OF THE FACTS ................................................................2

A. FACTS RELEVANT TO THE PROCEDURAL UNCONSCIONABILITY ANALYSIS .......................................................2

B. FACTS RELEVANT TO THE SUBSTANTIVE UNCONSCIONABILITY ANALYSIS .................................................... 10

IV. SUMMARY OF THE ARGUMENT ...................................................... 18

V. ARGUMENT ........................................................................................... 19

A. THE NATIONAL TREND IS AGAINST ENFORCEMENT OF CLASS ACTION BANS IN CONSUMER CONTRACTS ..................... 19

B. ANSWERING THE ELEVENTH CIRCUIT’S CERTIFIED

QUESTIONS .................................................................................... 21 1. Must Florida courts evaluate both procedural and

substantive unconscionability simultaneously in a balancing or sliding scale approach or may courts consider either procedural or substantive unconscionability independently and conclude their analysis if either one is lacking? .............................................. 21

A. THE EXCULPATORY CLAUSE TEST ....................................... 25

B. THE BALANCING OR SLIDING SCALE TEST ........................... 32

C. THE INDEPENDENT ANALYSIS TEST ..................................... 33

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2. Is the class action waiver provision in plaintiff’s contract with sprint procedurally unconscionable under Florida law? .................................................................... 35

3. Is the class action waiver provision in Plaintiff’s contract with Sprint substantively unconscionable under Florida law? .................................................................... 46

4. Is the class action waiver provision in Plaintiff’s contract with Sprint void under Florida law for any other reason? ............................................................................ 55

VI. CONCLUSION ........................................................................................ 60

VII. CERTIFICATE OF SERVICE ................................................................ 61

VIII. CERTIFICATE OF COMPLIANCE ...................................................... 62

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TABLE OF CASES

Page Alexander v. Anthony Intern. L.P., 341 F.3d 256 (3rd Cir. 2003) ................................................................................ 26 Altera Healthcare Corp. v. Bryant, 937 So.2d 263 (Fla. 4th DCA 2006) ..................................................................... 30 Alterra Healthcare Corp. v. Estate of Linton ex rel. Graham, 953 So.2d 574 (Fla. 1st DCA 2007) .......................................... 31 America Online v. Pasieka, 870 So.2d 170 (Fla. 1st DCA 2004) ............................................................... 28, 48 Amerifirst Federal Sav. and Loan Ass'n of Miami v. Century 21 Commodore Plaza, Inc., 416 So.2d 45 (Fla. 3rd DCA 1982) ....................................................................... 23 Aral v. Earthlink, Inc., 134 Cal. App. 4th 545 (2005) ............................................................................... 25 Ayyad v. Sprint Spectrum, L.P., 2008 WL 2937047 (Cal.Super.Ct.) .................................................................. 4, 17 Belcher v. Kier, 558 So.2d 1039 (Fla. 2nd DCA 1990). ............................................................................................. 33 Bellsouth Mobility LLC v. Christopher, 819 So.2d 171 (Fla. 4th DCA 2002) ...................................................................... 47 Blankfeld v. Richmond Health Care, Inc., 902 So.2d 296 (Fla. 4th DCA 2005) .................................................................... 31 Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359 (11th Cir. 2005)............................................................................. 51

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Carnegie v. Household Int’l, Inc., 376 F.3d 656 (7th Cir. 2004) ............................................................................ 56, 57 Coady v. Cross Country Bank, 729 N.W.2d 732 (Wis. Ct. App. 2007) ................................................................ 20 Coneff v. AT&T Corp., 620 F.Supp.2d 1248 (W.D. Wa. 2009) ................................................................ 20 Cooper v. QC Financial Services, Inc., 503 F.Supp. 2d 1266 (D.Ariz., 2007) ............................................................. 20, 52 Corvette Shop & Supplies, Inc. v. Coggins, 779 So.2d 529 (Fla. 2d DCA 2001) ...................................................................... 51 Dale v. Comcast, 498 F.3d 1216 (11th Cir. 2007)........................................................... 20, 50, 57, 58 Davis v. Powertel, Inc., 776 So.2d 971 (Fla. 1st

903 So.2d 1019 (Fla. 4th DCA 2005) ...................................................... 29, 30, 48 Gainesville Healthcare, Inc. v. Weston,

DCA 2000) ..................................................................... 58 Discover Bank v. Superior Court of Los Angeles, 113 P.3d 1100 (Cal. 2005) ............................................................................. 19, 43 Feeney v. Dell, Inc., 908 N.E. 2d 753 (Mass. 2009) ....................................................................... 19, 31 First Pacific Corp. v. Sociedade de Empreendimentos e Construcoes Ltda., 566 So.2d 3 (Fla. 3d DCA 1990) ......................................................................... 27 Fiser v. Dell Computer Corp., 188 P.3d 1215 (N.M. 2008) ........................................................................... 19, 31 Fonte v. AT&T Wireless Servs., Inc.,

857 So.2d 278 (Fla. 1st DCA 2003) ..................................................................... 40

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Gatton v. T-Mobile USA, Inc., 152 Cal.App.4th 571 (2007) ........................................................................... 42, 43 Golden v. Mobil Oil Corp., 882 F.2d 490 (11th Cir. 1989) ............................................................................... 25 Greater Orlando Aviation Authority v. Bulldog Airlines, 705 So.2d 120 (Fla. 5th DCA 1998) ..................................................................... 26 Hialeah Automotive, LLC v. Basulto, 22 so.3d 586 (Fla. 3d DCA 2009) ............................................................ 24, 26, 33 Holt v. O’Brien Imports, 862 So.2d 89 (Fla. 2d DCA 2003) .................................................................. 30, 59 Homa v. American Express Company, 558 F.3d 225 (3rd Cir. 2009). ................................................................................ 20 In re American Express Merchants Litigation, 554 F.3d 300 (2nd Cir. 2009) ................................................................................. 20 In re Nationsrent Rental Fee Litigation, 2009 WL 636188 (S.D. Fla. Feb 24, 2009) .......................................................... 42 In re Twenty Grand Offshore, Inc., 328 F. Supp. 1385 (S.D. Fla. 1971) ...................................................................... 27 Janda v. T-Mobile, USA, Inc., 267 Fed.Appx. 727 (9th Cir. 2008) ....................................................................... 20 Jenkins v. Fist Am. Cash Advance of Georgia, L.L.C., 400 F.3d 868 (11th Cir. 2005) ............................................................................... 51 Jersey Palm-Gross, Inc. v. Paper, 658 So.2d 531 (Fla. 1995) .................................................................................... 26 Kinkel v. Cingular Wireless, LLC, 857 N.E.2d 250 (Ill. 2006) ................................................................................... 19

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Kohl v. Bay Colony Club Condominium, Inc., 398 So.2d 865 (Fla. 4th DCA 1981) ................................................................ 20, 21 Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006) ........................................................... 20, 31, 51, 52, 58 Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, Ltd., 541 So.2d 1121 (Fla. 1989) ................................................................................... 46 Laster v. AT&T Mobility, LLC, 584 F.3d 589 (9th Cir. 2009) ................................................................................. 20 Leonard v. Terminex Int’l Co., 854 So.2d 529 (Ala. 2002) ................................................................................... 19 Lowden v. T-Mobile USA, Inc., 512 F.3d 1213 (9th Cir. 2008) ............................................................................... 20 Lozada v. Dale Baker Oldsmobile, Inc., 91 F.Supp.2d 1087 (W.D.Mich. 2000) ................................................................ 20 Molfetas v. Sprint Spectrum, L.P., et al., Palm Beach, Case No. 502004CA005317MB ..................................................... 11 Muhammad v. County Bank of Rehoboth Beach, 912 A.2d 88 (N.J. 2006) ........................................................................... 19, 25, 52 New England Mutual Life Insurance Co. v. Luxury Home Builders, Inc., 311 So.2d 160 (Fla. 3d DCA 1975) ..................................................................... 23 Palm Beach Motor Cars Limited, Inc. v. Jeffries, 885 So.2d 990 (Fla. 4th DCA 2004), .................................................................... 45 Pasteur Health Plan, Inc. v. Salazar, 658 So.2d 543 (Fla. 3d DCA 1995) ..................................................................... 33 Powertel v. Bexley, 743 So.2d 570 (Fla. 1st DCA 1999) ............... 19, 35, 36, 37, 38, 39, 41, 47, 48, 59

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Randolph v. Green Tree Fin. Corp.-Ala., 244 F.3d 814 (11th Cir. 2001) ......................................................................... 29, 51 Reeves v. Ace Cash Express, Inc., 937 So.2d 1136 (Fla. 2d DCA 2006) ................................................................... 48 Reuter v. Davis, 2006 WL 3743016 Case No. 502001CA001164XXXXMB (Fla. 15th Cir. Dec 12, 2006) .......... 42, 47 Rivera v. AT&T Corp., 420 F. Supp.2d 1312 (S.D. Fla. 2006) ................................................................. 54 Rollins v. Heller, 454 So.2d 580 (Fla. 3d DCA 1984) ..................................................................... 27 Rollins, Inc. v. Garrett, 177 Fed.Appx. 968 (11th Cir. 2006) ..................................................................... 48 Romano v. Manor Care, Inc., 861 So.2d 59 (Fla. 4th DCA 2004) ................................................................. 32, 45 Schwartz v. Alltel Corp., 2006 WL 2243649 (Ohio Ct. App. June 29, 2006) .............................................. 19 Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007) .......................................................................... 19, 52 Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007) ..................................................................... 34, 43, 44 S.D.S. Autos, Inc. v. Chrzanowski, 976 So.2d 600 (Fla. 1st DCA 2007) ............................ 20, 28, 29, 30, 48, 54, 58, 59 State ex rel. Dunlap v. Berger, 567 S.E.2d 265 (W. Va. 2002) ............................................................................. 19 Steinhardt v. Rudolph, 422 So.2d 884 (Fla. 3d DCA 1982) ......................................................... 23, 24, 32

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Tandy Corp. v. Eisenberg, 488 So.2d 927 (Fla. 3d DCA 1986) ..................................................................... 27 Thibodaeu v. Comcast Corp., 912 S.2d 874 (Pa.Super.Ct. 2006) ................................................................ 20, 56 Tillman v. Commercial Credit Loans, Inc., 655 S.E.2d 362 (N.C. 2008) ................................................................................. 19 Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003) ................................................................... 20, 25, 43 T-Mobile USA, Inc. v. Ford, 128 S.Ct 2503 (U.S. 2008) ................................................................................... 21 T-Mobile USA, Inc. v. Gatton, 128 S.Ct 2501 (U.S. 2008) ................................................................................... 21 T-Mobile USA, Inc. v. Janda, 129 S.Ct. 45 (U.S. 2008) ..................................................................................... 21 T-Mobile USA, Inc. v. Laster, 128 S.Ct 2500 (U.S. 2008) ................................................................................... 21 UCAN v. Sprint Spectrum L.P., San Diego Superior Court Case No. GIC 814461 ............................................... 18 Vasquez-Lopez v. Beneficial Or., Inc., 152 P.3d 940 (Or. App. 2007) .............................................................................. 19 Voicestream Wireless Corp. v. US Communications, Inc., 912 So.2d 34 (Fla. 4th DCA 2005) ........................................................................ 32 Williams v. State, 492 So.2d 1051 (Fla. 1986) ................................................................................... 52 Woods v. QC Fin. Svces. Inc., 280 S.W.3d 90 (Mo. Ct. App. 2008) .................................................................... 19

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Zill et al. v. Sprint Spectrum et al., Superior Court of California, Alameda County, Case No. RG03114147 ........................................................................................ 17

AUTHORITIES Cal.CC.P. §1281.96............................................................................................... 17 Florida Statute §501.967 ....................................................................................... 29 Florida Statute §501.211(1) (FDUTPA) ................................................... 11, 30, 59 Florida Statute §501.2105(1) (FDUTPA) ............................................................. 50 NAF Rule 29F (2008) .................................................................................... 12, 17

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I. QUESTIONS OF LAW CERTIFIED BY THE UNITED STATES ELEVENTH CIRCUIT COURT OF APPEAL

1. Must Florida courts evaluate both procedural and substantive unconscionability simultaneously in a balancing or sliding scale approach or may courts consider either procedural or substantive unconscionability independently and conclude their analysis if either one is lacking?

2. Is the class action waiver provision in plaintiff’s contract with sprint procedurally unconscionable under Florida law?

3. Is the class action waiver provision in Plaintiff’s contract with Sprint substantively unconscionable under Florida law?

4. Is the class action waiver provision in Plaintiff’s contract with Sprint void under Florida law for any other reason?

II. STATEMENT OF THE CASE

In the interest of saving space for argument, Appellant adopts the statement

of the case as set forth in the 11th Circuit’s opinion certifying this matter to this

Court. (Opinion at 26-28)

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III. STATEMENT OF THE FACTS

The 11th Circuit’s fact summary is generally accurate, but is under-inclusive

of facts relevant to the issues before the Court and over-inclusive of other,

irrelevant facts. We have therefore restated the record evidence to focus the Court

on those facts that are most relevant to the certified questions and correct a few

errors in the 11th Circuit opinion.

Because the 11th Circuit has asked this Court to determine whether Sprint’s

class action ban is both procedurally and substantively unconscionable under

Florida law, we have divided our statement of facts into two sections: 1) Facts

relevant to the procedural unconscionability analysis; and 2) Facts relevant to the

substantive unconscionability analysis.

A. FACTS RELEVANT TO THE PROCEDURAL UNCONSCIONABILITY ANALYSIS. The procedural unconscionability analysis looks at how the offending

contract provision was imposed on consumers. In this case, Sprint’s class action

ban is procedurally unconscionable because it is a contract of adhesion that Sprint

unilaterally imposed on its customers without notice, and Sprint’s customers could

not reject it without suffering a penalty and loss of their equipment.

James Pendergast first became a Sprint customer in August 2001, when he

purchased his Sprint wireless phone and signed a two year contract. Docket 60,

p.1. This phone was accompanied by Sprint’s service Terms And Conditions, with

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an effective date of May 22, 2001. Docket 60, p.1. These Terms And Conditions

did not contain a class action waiver. (Opinion at 6)

As noted in the Eleventh Circuit Opinion, the May 22, 2001 Terms and

Conditions allowed Sprint to change the terms of the agreement at any time

without notice beyond publication on Sprint’s website, without further

consideration, and the changes would become effective the second the customer

used his phone after the changed term was posted. 1

The Eleventh Circuit suggests that the Plaintiff could have terminated his

service if he did not accept future changes made to the Terms and Conditions, such

as the addition of a class action ban. (Opinion at 4) This is only partially correct.

In reality, Plaintiff had only one window within which to terminate his service

without penalty – the first 14 days of his contract. (Opinion at 5). Since the class

action ban was not part of the May 22, 2001 Terms and Conditions and was not

added within 14 days of the start of Plaintiff’s contract, this 14-day termination

window was obviously meaningless to the Plaintiff and any other customer who

contracted with Sprint more than 14 days before June 30, 2004.

(Opinion at 4)

Before June 30, 2004, any customer who wanted to terminate their service

plan because they did not accept Sprint’s unilateral changes to the Terms and

1 The record contains no Terms and Conditions between May 22, 2001 and June

30, 2004. Accordingly, the district court and 11th Circuit treated the Plaintiff as subject to the May 22, 2001 Terms and Conditions through June 29, 2004.

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Conditions was subject to an early termination fee.2 Unlike later versions of the

Terms and Conditions, there was no provision in the May 22, 2001 Terms and

Conditions that allowed the customer a 30-day window to terminate their contract

without penalty if Sprint changed “a material term of the Agreement and that

change has a material adverse affect on you [the customer].”3

The 11th Circuit’s Opinion is therefore incorrect when it states: “Thereafter,

each time Sprint amended its Terms and Conditions, Plaintiff had 30 days to cancel

his service without payment of any penalty fees.” Under the 2007 and 2008 Terms

and Conditions, Sprint’s customers could only terminate their contracts if they

could demonstrate to Sprint that there was a change in a “material term” (when

compared with the prior contract) that had a “material adverse effect” on them.

(Opinion at 9). The

30-day termination window wasn’t added until June 30, 2004 -- only covering

changes that occurred after the class action ban had become effective.

2 A $74 million dollar verdict was recently entered against Sprint related to its

early termination fees. Ayyad v. Sprint Spectrum, L.P., 2008 WL 2937047 (Cal.Super.Ct. July 28, 2008). Docket 54-14.

3 Sprint does not define “material term” or “material adverse effect”. Ostensibly, Sprint could have simply rejected any change in terms proffered by its customer as insufficiently material to allow them to terminate without penalty, once again placing the consumer in the untenable position of fighting a multibillion corporation over $20 or simply giving up. See, generally, Vitali Declaration, Docket 54-13, pp. 16-19 et seq.

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That’s in reality a very limited right of termination, and it did not encompass the

class action ban because its terms did not materially change after June 30, 2004.4

So James Pendergast and Sprint’s 17 million other consumers actually had

no right under the May 22, 2001 Terms and Conditions to terminate their service

plan without penalty as a result of Sprint’s addition of the class action ban. Even if

they had such a right, it would have been rendered useless because they weren’t

given notice of the change: Sprint did not tell its customers that it had added a

class action waiver to its Terms and Conditions. All Sprint did was post the new

terms on its website. This is important because both before and after June 30,

2004, when Sprint promulgated a new set of Terms and Conditions with substantial

changes, it sent its customers an insert in their bills notifying them of the changes

and advising them to review the new Terms and Conditions on Sprint’s website

before they took effect. Docket 54-2. But Sprint did not do this when it added the

class action ban in June 2004. Instead, customers like Pendergast received no

4 The 11th Circuit’s inclusion of full length excerpts from Sprint’s 2007 and 2008

Terms and Conditions creates the impression that they should be accorded weight and significance, when in fact the opposite is true. The mere publication of amended Terms and Conditions in 2007 and 2008 did not give a single Sprint customer the retroactive right to seek termination over the class action ban because it was not a new term in 2007 or 2008. Instead, reference to the 2007 and 2008 Terms and Conditions is only necessary to confirm that they also contain the same class action waiver Sprint first introduced on June 30, 2004, proving that no “material change” to class action waiver had occurred since June 30, 2004, that would have allowed Sprint’s customers to terminate their contracts without penalty.

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notice at all of this change, and they were stuck with it regardless. 5

That is why June 30, 2004, is the only date that really matters in this case.

Everything that happened afterwards – Sprint’s subsequent changes to its Terms

and Conditions in 2007 and 2008 or Pendergast’s second contract for service in

June 2005 – had no effect whatsoever on the Plaintiff’s rights on his first line,

which is the line he incurred the improper roaming charges on. (Opinion at 27)

This is because under the “changes to agreement” provision in Sprint’s May 22,

2001 Terms and Conditions, Pendergast and every other Sprint customer accepted

the class action ban and the rest of Sprint’s June 30, 2004, changes in terms the

very first time they used their phone on June 30, 2004, even though they had no

idea these changes had been made. Docket 60, p.2.

Docket 60,

p.2.

Even though the class action ban was added on June 30, 2004, Sprint failed

to notify its customers of its existence in the Advantage agreement that customers

actually signed at the time of purchase. On July 2, 2005, when Pendergast

5 Even if Sprint’s customers hypothetically did have a right to terminate their

contracts without penalty because of the addition of the class action ban (and they did not), Sprint’s failure to provide actual notice of the change to its customers would have prevented all but the most diligent of them from exercising this right because only those hypothetical customers who constantly checked Sprint’s website for updates to the Terms and Conditions; compared the updates line-by-line with prior versions to find the changes; appreciated the effect of the class action ban; and called Sprint in time would have been entitled to cancel.

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contracted with Sprint to add a second phone for business, he signed a new two-

year contract with Sprint, in order to receive a discount on the phone. 6

So even if we assume Sprint would not have charged the early termination

fee contained in its May 22, 2001 Terms and Conditions, all 17 million of Sprint’s

customers faced the same limited choice on June 30, 2004: terminate your service

and lose your equipment investment or stay with Sprint and waive your rights. If

Florida and other states are to have meaningful consumer protection laws, it’s

Docket. 60,

p.2. The agreement he signed conspicuously alerted Pendergast to the presence of

an arbitration provision, but it contained no mention of the class action ban.

Docket 33-9.

But even if it had, Pendergast was still tied to Sprint. If Pendergast had

terminated his new contract within 14 days, he would only have received a refund

for his new phone. He was still stuck with the rest of his Sprint equipment. With

respect to Pendergast’s first phone, the court noted “it is undisputed that Plaintiff’s

wireless equipment is non-transferable, thereby rendering such hardware useless in

the event of service termination.” Docket 60, p.4-5.

6 There is actually no record evidence that Pendergast received a discount on his

2005 phone purchase. But it is industry practice for cell phone carriers to subsidize the cost of the phone when a customer signs a new 2 year service plan. However, phones purchased without signing a new agreement are NOT subsidized, like the phones Pendergast purchased in February 2003 and July 2006. (Opinion at 7 and 14)

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important to remember that this case is ultimately not about one person or one

telephone, but 17 million of them – representing an enormous investment in

equipment.

What’s worse, if Pendergast or any of Sprint’s other customers had decided

to terminate their service and accept the loss of their equipment, they would have

been no better off. In June 2004, when the Plaintiff could have ostensibly

terminated his service based on the addition of the class action ban (had he known

of it), every comparable alternative cell phone carrier also utilized a class action

ban. 7

First, Virgin Mobile exclusively uses the Sprint PCS network, the same

network Pendergast would be leaving on account of Sprint’s wrongful roaming

charges (the underlying issue in this lawsuit), except Virgin Mobile had no

roaming ability at all. Docket 54-4. As a result, Mr. Pendergast would have

According to Sprint, this left Pendergast with a choice between Virgin

Mobile and TracFone as the only two minor market carriers he could have

contracted with after tossing away his current phone and cancelling his relationship

with Sprint. Neither carrier was a real alternative.

7 All of the major cellular carriers -- Sprint, Verizon, AT&T/Cingular, and T-

Mobile (which in combination controlled over 90% of the market) – had added class action bans to their contracts. Docket 42-2,3 and 54-7. Even smaller carriers Boost Mobile, Metro PCS, Alltel, Suncom, US Cellular and Cricket imposed class action bans on their customers. Docket. 42-2 and 54-6.

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changed his service to a carrier using the exact same network that he was leaving

because of coverage and roaming issues, only now, instead of having roaming

service, his phone would have no service at all. This hardly constitutes a

meaningful choice: Leave Sprint, lose your equipment, but stay on the same

network with the same coverage problems and have your new phone work in fewer

locations than before.

TracFone was also not a real alternative. While TracFone’s contract did not

at the time contain a class action ban, TracFone was engaged in exactly the same

type of unfair and deceptive practices as Sprint – charging its customers improper

roaming charges for calls made within a covered area. In 2006, a class action

lawsuit was filed against TracFone for this misconduct, which the company settled

in 2007 by providing all of its customers nationwide with credit for the improper

roaming charges. Docket 54-5. Not surprisingly, TracFone added a class action

ban to its Terms and Conditions shortly thereafter. Docket 42-2.

In sum, the relevant facts are that Sprint added the class action ban to its

contracts without giving any notice whatsoever to its customers, and Sprint’s

customers had no right to opt-out of the class action waiver and no right to cancel

their contracts without penalty when it was added. If a Sprint customer still

wanted to terminate his or her contract because of it, the customer not only had to

pay a money penalty to Sprint, they would also lose their phone investment and

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their only alternatives for cellular service were two minor market carriers that had

the very same roaming issues that are the subject of this lawsuit.

B. FACTS RELEVANT TO THE SUBSTANTIVE UNCONSCIONABILITY ANALYSIS.

The substantive unconscionability analysis looks at the unfairness of the

offending contract provision itself. In this case, the class action ban is

substantively unconscionable because it acts as an exculpatory clause for corporate

wrongdoers.

The terms of the clause itself are the best evidence that Sprint intends its

class action ban to be an exculpatory clause. Sprint’s Terms and Conditions state

that if the class action ban is found to be unenforceable, then Sprint’s mandatory

arbitration clause is automatically voided as well. Docket 60, p.3. In other words,

if Sprint cannot avoid class treatment through the use of the class action ban, Sprint

doesn’t want to go to arbitration at all. Instead, it wants to remain in court, where

it can avoid the expense of class action arbitration and avail itself of the very

appellate review that it denies its own customers.

The fact that Sprint refuses to arbitrate on a class-wide basis exposes

Sprint’s intellectual dishonesty by revealing that its true goal is not the efficient,

cost effective delivery of justice through arbitration, but the avoidance of justice

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entirely.8

Second, to demonstrate that individual consumers would be unable to obtain

representation without the use of the class action mechanism, we submitted the

affidavits of Florida class action and consumer attorneys Marc Wites, Edward

Zebersky, Dan Dolan, James Hannon and Kevin Love.

By requiring individual arbitration, Sprint ensures that it is insulated

from responsibility for its actions because no single loss will ever have the

economic value to deter Sprint’s misconduct, nor the legal weight to stop it since

Sprint’s contract also bans broad injunctive relief like that provided by FDUTPA

in F.S. §501.211(1). Therefore no single consumer claim will ever have any

preclusive effect against Sprint, because no Florida claimant can obtain the relief

provided by Florida law in F.S. §501.211(1).

9

8 Incidentally, in the Florida case Molfetas v. Sprint Spectrum, L.P., et al., 15th

Judicial Circuit Case No. 502004CA005317MB, Sprint chose to waive arbitration because it thought it was before a Judge that would be sympathetic to its defenses. This is further evidence that Sprint uses arbitration solely as a litigation tool, not out of any principle.

9 Edward Zebersky is the former president of the Florida Justice Association. Dan Dolan is the former president of the Miami Dade Justice Association. Marc Wites is the author of The Florida Civil Litigation Handbook: Actions, Defenses and Evidence and Rules and the co-author of Florida Causes of Action. James Hannon has been recognized as a “Top Lawyer” in the South Florida Legal Guide, as one of Florida’s “Legal Elite” in Florida Trend Magazine and as a Florida Super Lawyer in Florida Super Lawyer’s Magazine. All five of the affiants practice consumer class action law and have a combined 89 years of legal experience between them. Each is eminently qualified to render the opinions set forth in their affidavits.

Collectively, they

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demonstrate that the cost of pursuing a highly technical case like this one on an

individual basis, and not a class basis, is a near-absolute bar to representation,

regardless of whether a discretionary award of attorneys fees is part of the potential

recovery. Docket 42-6,7,8,9,10. There are several reasons for this.

As explained by Edward Zebersky, for Pendergast (or any other customer) to

prevail on his individual claim, he would have to demonstrate that the contested

roaming charges occurred while in an area identified as a coverage area on Sprint’s

maps; that Sprint had the technology to determine where the customer was located;

and that Sprint had the technical ability to remedy these problems in its billing

software. Docket 42-7, p.2. These issues cannot be proven without extensive

discovery that is generally not available in arbitration, thus making it impossible to

prevail on such a claim. Docket 42-7, p.4. As a further disincentive, the rules of

the National Arbitration Forum (“NAF”), Sprint’s chosen arbitration provider,

allow the arbitrator to impose the costs of discovery on the non-prevailing party.

See NAF Rule 29F (2008).10

If the Plaintiff decided to proceed in small claims court, the preparation of

the case would require extensive and highly technical expert testimony on how

10 In July 2009, the Minnesota Attorney General sued the NAF, alleging that it

was essentially a biased shill for creditors like Sprint, not a neutral forum. As part of its settlement with the State of Minnesota, the NAF no longer handles consumer arbitrations. See http://www.ag.state.mn.us/Consumer/PressRelease/ 090720NationalArbitrationAgremnt.asp

http://www.ag.state.mn.us/Consumer/PressRelease/%20090720NationalArbitrationAgremnt.asp�



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Sprint’s billing and cellular telephone systems work. Since no consumer would

willingly pay a lawyer’s hourly rate to recover $30, such cases must be taken on a

contingent fee. Docket 42-9, p.2. But as explained in the affidavits, no reasonable

lawyer would take the unreasonable economic risk of such a contingency. The

hiring of expert witnesses with the specialized knowledge necessary to prove such

a case would easily cost more than $100,000 – for an individual claim valued at

less than $30. 11

The existence of the prevailing party fee provision in FDUTPA does nothing

to alter this equation. First, as Mr. Dolan notes, “Mr. Pendergast’s FDUTPA claim

is only one of his claims against Sprint and he may not prevail on it. If Mr.

Pendergast does not prevail on the FDUTPA claim, he has no right to recover

attorney’s fees even if he is successful in every one of his other claims and he

Docket 42-7, p.3. Just as no consumer would willingly pay these

costs or run the risk of having to repay a similar amount to Sprint, no law firm

could afford them on a single $30 claim. As explained by James Hannon, “Plainly,

there is no possible contingent fee agreement that would enable any counsel to take

Mr. Pendergast’s $30.00 claim on a contingent basis. This is the reason, of course,

that class action lawsuits were created in the first place.” Docket 42-9, p.2.

11 The small claims filing fee in Miami Dade County for a claim less than $100 is

$55. It is a rare person indeed who would be willing to spend $55 to recover $30.

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cannot recover damages on those claims sufficient to justify a contingent fee.”

Docket 42-8, p.2.

Second, FDUTPA fee awards are discretionary, not mandatory, so the

enormous risk of non-recovery remains. Docket 42-9, p.2. Even if fees were

awarded under FDUTA, no fee multiplier is available under the statute, making

this claim the very worst type of contingency – one that carries all the risk of loss

but offers none of the rewards. Docket 42-9, pp.2-3. Again, no reasonable law

firm would take such a case since the most the law firm could recover despite all

its risk is the same hourly rate it could have billed an hourly client with no risk of

non-recovery. Docket 42-10, p.2.

Finally, and most importantly, as Mr. Hannon explains: “if Mr. Pendergast

were to lose his FDUTPA claim, he could owe Sprint thousands of dollars in

attorney’s fees on a $30.00 claim, since FDUTPA provides for attorney’s fees to

the prevailing party, not just the plaintiff. No reasonable client would put

themselves in that much risk to bring a $30.00 claim, and no reasonable or ethical

attorney would allow a client to do so. In this respect, the fee provision of

FDUTPA actually serves as a disincentive for individual consumers to bring claims

like Mr. Pendergast’s, not an incentive for them to obtain counsel.” Docket 42-9,

pp. 3. So not only would it be unreasonable for an attorney to bring such a claim,

it could quite possibly be unethical as well.

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As explained by Mr. Wites, “Only in a class where an attorney can recover

her fees under a common fund theory is there an incentive to prosecute the

consumer claims at issue in the instant case.” Docket 42-6, p.3. Mr. Dolan

concludes “the practical end result of Sprint’s class action waiver is therefore not

thousands of individual claims, but no claims at all. And with the current burdens

faced by our under-funded Court system, it would seem to be counterproductive

for any Court to favor a policy that encourages thousands of small individual

claims over one claim dispositive of all issues.” Docket 42-8, p.3.

As a final point, we note that Class actions are valuable not only for

providing redress to those that have been wronged, they are valuable for providing

notice that the consumer has been wronged in the first place. As explained by Mr.

Wites, “it is very likely that the vast majority of class members are unaware that

they have any claim at all, as Sprint has presumably not disclosed to its customers

that it has allegedly overcharged them.”12

12 Sprint did not contest any of these points below. In addition to these affidavits,

we also provided declarations of 11 other attorneys from Washington, California, Connecticut, Florida, Wisconsin, North Carolina, Illinois, Missouri, and Massachusetts to confirm it. Docket 54-16 through 26. Each of these declarations details the reasons why there is no market for lawyers to represent individuals with nominal claims of the type that Pendergast and the rest of the class possesses. This evidence was unrebutted below, and the district court appeared to agree with it based on its statement that “a consumer who suffers $20.00 in damages may have to forego his claim for lack of adequate representation, regardless of the probability of victory or relative merits to the dispute.” Docket 60, p.6, FN8.

Docket 42-6, p.4.

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The declaration of Sally Gustafson Garratt, Division Chief of the Consumer

Protection Department of the Washington State Attorney General’s Office from

1993 to 2001, explains the importance of class actions in protecting consumers and

ensuring the remedial purpose of state deceptive and unfair practices statutes like

FDUTPA is not frustrated:

Without the means to address a deceptive or unfair business practice on a class wide basis by way of injunction and other relief, the deception will continue unabated, thus allowing the company to continue to benefit from the deception of customers, who are unaware that they have been deceived or are too busy or intimidated to pursue their remedies.

Gustafson Garratt Declaration at 6-7 (Docket 54-11, pp. 6-7)

Sprint also appeared to concede this point, suggesting instead that public

enforcement by the State Attorney Generals would be a meaningful alternative to

private enforcement by consumers using class actions. In response to this, we

provided the court with the amicus curiae briefs from the Attorneys General of

Washington, New Jersey, and North Carolina, along with the Garratt declaration.

Docket 54-8 through 11. Each of these briefs, and Ms. Gustafson Garratt’s

declaration, argued strongly against the enforceability of consumer class action

waivers, confirming that state governments simply do not have the resources to

police all potential corporate wrongdoers, and they instead rely heavily on private

enforcement through the use of state consumer protection statutes and private class

action lawsuits.

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We also provided the court with evidence showing that almost no small

value consumer arbitration claims were filed against Sprint in the NAF and the

AAA. California law (Cal.CC.P. §1281.96) requires private arbitration companies

doing business in California to maintain records of all arbitrations performed over

the last five years. The NAF’s records for California claimants, which are

published on its website, revealed that over the past five years, only one arbitration

proceeding occurred involving Sprint, and since the claim at issue was $50,110.00,

it could hardly be suggested that it was a consumer claim of the type at issue in the

instant case. Docket 54-13, p.8. The American Arbitration Association records

show that during the five year period from October 1, 2003 to September 30, 2008,

the AAA handled only five consumer arbitrations involving Sprint companies

nationwide even though Sprint had 17 million customers each of those years.

Docket 54-13, p.5-6. Only one resulted in an award for a consumer.

Finally, we demonstrated to the court that class actions against Sprint in

jurisdictions that refuse to enforce class action bans have benefitted consumers

wronged by Sprint’s business practices. In addition to Ayyad, supra, we provided

the court with evidence of two class settlements entered into by Sprint. In the first,

Zill et al. v. Sprint Spectrum et al., Superior Court of California, Alameda County,

Case No. RG03114147, Sprint settled two related cases brought in California and

Florida (under FDUTPA) regarding Sprint’s practice of locking their phones so

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they are only capable of being used on Sprint’s network. Sprint agreed to certify a

national class as part of the settlement of these matters on June 28, 2007, and

unlock their customer’s phones. Docket 54-15. In the second, UCAN v. Sprint

Spectrum L.P., Superior Court of California, San Diego County, Case No. GIC

814461, the plaintiffs challenged Sprint’s failure to provide a cancellation window

before it imposed additional fees on its customers in July 2003. The plaintiffs

there were able to obtain a temporary restraining order keeping the cancellation

window open and ultimately obtained a class wide settlement returning early

termination fees that had been charged to consumers and improving Sprint’s

disclosure practices. Docket 54-16.

IV. SUMMARY OF THE ARGUMENT Despite our best efforts, we were unable to answer the four certified

questions within the 50 page limit. We have therefore contemporaneously filed a

motion requesting leave to exceed the page limit. In an effort to limit our excess

pages to only the amount necessary, we would request the Court’s indulgence in

allowing us to forego the summary of argument.

V. ARGUMENT A. THE NATIONAL TREND IS AGAINST ENFORCEMENT OF CLASS

ACTION BANS IN CONSUMER CONTRACTS.

Before we address the specifics of this case, we feel it is important to note

the building consensus among courts nationwide that class action bans in consumer

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contracts are unconscionable and unenforceable when they are used as exculpatory

clauses to insulate wrong-doers from accountability.

Florida was among the first states to reject a contract clause that eliminated

the availability of class relief in the case of Powertel v. Bexley, 743 So.2d 570 (Fla.

1st DCA 1999), a case directly analogous to the instant case and one that we will

discuss in detail below. The courts joining Florida’s First DCA in reaching the

same result include the Supreme Courts of Alabama, California, Illinois,

Massachusetts, New Jersey, New Mexico, North Carolina, Washington, West

Virginia, and Wisconsin; intermediate appellate courts in Missouri, Ohio, Oregon

and Pennsylvania; and Federal District Courts in Arizona and Michigan.13

13 See, e.g., Leonard v. Terminex Int’l Co., 854 So.2d 529 (Ala. 2002); Discover

Bank v. Superior Court of Los Angeles, 113 P.3d 1100 (Cal. 2005); Kinkel v. Cingular Wireless, LLC, 857 N.E.2d 250 (Ill. 2006); Feeney v. Dell, Inc., 908 N.E. 2nd 753 (Mass. 2009); Muhammad v. County Bank of Rehoboth Beach, 912 A.2d 88 (N.J. 2006); Fiser v. Dell Computer Corp., 188 P.3d 1215 (N.M. 2008); Tillman v. Commercial Credit Loans, Inc., 655 S.E.2d 362 (N.C. 2008); Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007); State ex rel. Dunlap v. Berger, 567 S.E.2d 265 (W.Va. 2002); Woods v. QC Fin. Svces. Inc., 280 S.W.3d 90 (Mo. Ct. App. 2008); Schwartz v. Alltel Corp., 2006 WL 2243649 (Ohio Ct. App. June 29, 2006); Vasquez-Lopez v. Beneficial Or., Inc., 152 P.3d 940 (Or. App. 2007); Thibodaeu v. Comcast Corp., 912 S.2d 874 (Pa.Super.Ct. 2006); Coady v. Cross Country Bank, 729 N.W.2d 732 (Wis. Ct. App. 2007); Lozada v. Dale Baker Oldsmobile, Inc., 91 F.Supp.2d 1087 (W.D.Mich. 2000); Cooper v. QC Fin. Svces., Inc., 503 F.Supp.2d 1266 (D.Ariz., 2007).

The

Federal Courts of Appeal for the First, Second, Third, Ninth, and Eleventh Circuits

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have also rejected class action waivers.14

Finally, we also note that the U.S. Supreme Court just last year passed on the

opportunity to review four cases holding class action bans unenforceable and

allowed the decisions to stand. See T-Mobile USA, Inc. v. Laster, 128 S.Ct 2500,

171 L.Ed.2d 786 (U.S. 2008), T-Mobile USA, Inc. v. Gatton, 128 S.Ct 2501, 171

L.Ed.2d 786 (U.S. 2008), T-Mobile USA, Inc. v. Janda, 129 S.Ct. 45, 172 L.Ed.2d

22 (U.S. 2008), and T-Mobile USA, Inc. v. Ford, 128 S.Ct 2503, 171 L.Ed.2d 787

Of these cases, all but four were decided

in 2005 or later.

Recent opinions on this issue in Florida and elsewhere have recognized the

trend against enforcement of class action bans. See, e.g., S.D.S. Autos, Inc. v.

Chrzanowski, 976 So.2d 600 (Fla. 1st DCA 2007) (joining 13 other courts in

“declining to enforce bans on class relief in consumer contracts that give rise to

claims under consumer protection statutes”) and Coneff v. AT&T Corp., 620

F.Supp.2d 1248 (W.D. Wa. 2009) (“The Court recognizes that recent jurisprudence

views class-action waivers unfavorably… This ruling is therefore consistent with

the modern trend.”)

14 Ting v. AT&T, 319 F.3d 1126 (9th Cir. 2003); Lowden v. T-Mobile USA, Inc.,

512 F.3d 1213 (9th Cir. 2008); Janda v. T-Mobile, USA, Inc., 267 Fed.Appx. 727 (9th Cir. 2008); Laster v. AT&T Mobility, LLC, 584 F.3d 589 (9th Cir. 2009); Kristian v. Comcast, 446 F.3d 25 (1st Cir. 2006); In re American Express Merchants Litigation, 554 F.3d 300 (2nd Cir. 2009); Homa v. American Express Company, 558 F.3d 225 (3rd Cir. 2009); and Dale v. Comcast, 498 F.3d 1216 (11th Cir. 2007).

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(U.S. 2008). If the U.S. Supreme Court were dissatisfied with these rulings, it

likely would have accepted review.

B. ANSWERING THE ELEVENTH CIRCUIT’S CERTIFIED QUESTIONS

1. Must Florida Courts Evaluate Both Procedural And Substantive Unconscionability Simultaneously in a Balancing or Sliding Scale Approach or May Courts Consider Either Procedural or Substantive Unconscionability Independently and Conclude Their Analysis if Either One is Lacking?

The first question certified by the Eleventh Circuit suggests that there are

only two legal approaches to determine the unconscionability of contract terms.

Because Florida law actually recognizes a third option, we respectfully urge the

court to re-frame the question a little more broadly: What is the proper standard

by which Florida Courts should evaluate the unconscionability of a contract term?

Florida case law recognizes three different approaches for evaluating

unconscionability: 1) Under the first approach, the “exculpatory clause” test, if the

clause at issue is sufficiently exculpatory or frustrates the remedial purpose of a

statute, then procedural unconscionability is not required to void the term. 2)

Under the second approach, the “balancing” or “sliding scale” test, both procedural

and substantive unconscionability are required, but if there is a substantial amount

of one element, then only a modicum of the other element is required for the clause

to be deemed unconscionable. 3) Finally, under the third approach, the

“independent analysis” test used by the district court here, the court evaluates

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procedural and substantive unconscionability independently and ends its analysis if

either one is lacking.

As we’ll explain below, the modern trend favors the first two approaches.

Where the offending clause is so substantively unconscionable that it acts as an

exculpatory clause or frustrates the remedial purpose of a statute, a showing of

procedural unconscionability is not, and should not be, required. This ensures that

contracts cannot be written to avoid state law or completely shield one party from

liability at the expense of the other. Since Sprint’s contract does both, this case is a

prime example of when this test should apply.

In other circumstances, where the offending clause is substantively

unconscionable for reasons other than exculpation, the sliding scale test is most

appropriate. For the reasons we’ll discuss, Sprint’s class action ban violates this

test as well.

The final approach, the “independent analysis” test, is simply too arbitrary,

inconsistent, and on the whole unworkable, because it allows egregiously unfair

contract terms to stand because of a supposed shortfall of procedural

unconscionability. Because it is unnecessary and unreliable, we ask the Court to

reject the continued use of this test in Florida. However, we would note that if

correctly applied to the facts of this case, Sprint’s contract fails this test as well.

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Therefore, the Court should find Sprint’s class action ban unconscionable under

any application of Florida law.

A. THE EXCULPATORY CLAUSE TEST

Before 1980, numerous Florida cases performed an unconscionability

analysis without any reference to a requirement of procedural unconscionability.15

The law in Florida is clear that an unconscionable contract or an unconscionable term therein will not be enforced by a court of equity. “It seems to be established by the authorities that where it is perfectly plain to the court that one party [to a contract] has overreached the other and has gained an unjust and undeserved advantage which it would be inequitable to permit him to enforce, that a court of equity will not hesitate to interfere, even though the victimized parties owe their predicament largely to their own stupidity and carelessness.” Peacock Hotel, Inc. v. Shipman, 103 Fla. 633, 138 So. 44, 46 (1931). Stated differently, “[i]f a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any

Instead, the court simply examined the offending clause to determine if it was

grossly inequitable or unjust. Steinhardt v. Rudolph, 422 So.2d 884, 889-90 (Fla.

3d DCA 1982) explains the usefulness of the balancing test that we cover in the

next section, but emphasizes that in circumstances where the offending clause is

sufficiently inequitable, there is no need for procedural unconscionability:

15 See, e.g., Amerifirst Federal Sav. and Loan Ass'n of Miami v. Century 21

Commodore Plaza, Inc., 416 So.2d 45, (Fla. 3rd DCA 1982); New England Mutual Life Insurance Co. v. Luxury Home Builders, Inc., 311 So.2d 160 (Fla. 3d DCA 1975).

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unconscionable term as to avoid any unconscionable result.” Restatement (Second) of Contracts § 208 (1979)

* * * In a more modern context, “ ‘[m]ost courts take a ‘balancing approach’ to the unconscionability question … [but] This procedural-substantive analysis is, however, only a general approach to the unconscionability question and is not a rule of law. For example, the Florida decisions concerning unconscionability as applied to a mortgage foreclosure case are entirely devoid of this analysis. …. Moreover, the Restatement (Second) of Contracts § 208 (1979) does not even attempt to define unconscionability in a black letter rule of law, whether in procedural-substantive terms or otherwise, because the legal concept involved here is so flexible and chameleon-like.

Steinhardt at 889-90 (emphasis added) (internal citations omitted).

This analysis largely fell into disuse in the early 1980s; however, we are

unaware of any case holding that this analytical approach is no longer good law.

Indeed, Judge Gerald Cope, former Chief Judge of the Third District Court of

Appeals, recently suggested that the test remains good law and should be applied

more frequently.

We will use Judge Cope’s suggestion as our jumping off point. In Hialeah

Automotive, LLC v. Basulto, 22 So.3d 586 (Fla. 3d DCA 2009), the Third District

held that an arbitration provision in an auto dealer’s contract was unenforceable

due to unconscionability. In a lengthy footnote at the end of the opinion, Judge

Cope reiterated the validity of this test and Steinhardt, writing as follows:

Speaking for himself, the writer of this opinion suggests that in an appropriate future case this court should reconsider Murphy v. Courtesy Ford, L.L.C., 944 So.2d 1131 (Fla. 3d DCA 2006). In

http://web2.westlaw.com/find/default.wl?serialnum=0289907177&tc=-1&rp=%2ffind%2fdefault.wl&sv=Split&utid=1&rs=WLW10.02&db=0101603&tf=-1&findtype=Y&fn=_top&mt=Florida&vr=2.0&pbc=1BDE889E&ordoc=1982137255�

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Murphy, this court said, “To invalidate a contract under Florida law, a court must find that the contract is both procedurally and substantively unconscionable.” Id. at 1134 (citing Powertel, Inc. v. Bexley, 743 So.2d 570, 574 (Fla. 1st DCA 1999)) (emphasis added). Although the requirement for both procedural and substantive unconscionability has been repeated in a number of arbitration cases in recent years, I respectfully suggest that holding is (a) illogical, and (b) inconsistent with this court's decision in Steinhardt v. Rudolph, 422 So.2d 884 (Fla. 3d DCA 1982).

* * * The Steinhardt panel held: “This procedural-substantive analysis is ... only a general approach to the unconscionability question and is not a rule of law.” Id. (emphasis added).[16

Assuming arguendo that procedural unconscionability is required, that condition should be deemed to be satisfied where, as here, the arbitration clause is a non-negotiated provision contained in a pre-printed form. See Pasteur Health Plan, Inc. v. Salazar, 658 So.2d 543, 544 (Fla. 3d DCA 1995)

] Instead, procedural unconscionability is merely one factor to be considered-not a required element. Clearly, if a contract is sufficiently inequitable to meet the test of substantive unconscionability, then it should not be enforced.

* * *

17

16 In Golden v. Mobil Oil Corp., 882 F.2d 490 (11th Cir. 1989), the Eleventh

Circuit recognized this standard when it cited to Steinhardt and followed it by the parenthetical – “rejecting procedural-substantive analysis as a rule of law but noting that it is ‘generally helpful.’” Golden at 493.

Hialeah Automotive at 592, FN4 (all emphasis in original).

17 Other jurisdictions have held that the element of procedural unconscionability is satisfied if the contract is a contract of adhesion, like Sprint’s. See, e.g., Muhammad v. County Bank of Rehoboth Beach, 912 A.2d 88, 99 (NJ 2006) (Exculpatory waivers in a contract of adhesion that seek a release from a statutorily imposed duty are void as against public policy); Aral v. Earthlink, Inc., 134 Cal. App. 4th 545, 557 (2005) and Ting, supra, 319 F.3d at 1128. See also Alexander v. Anthony Intern. L.P., 341 F.3d 256, 265 (3rd Cir. 2003) (contract of adhesion satisfies procedural unconscionability requirement).

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We firmly believe that this is the appropriate case to address Judge Cope’s

concerns. The starting point for this argument is Judge Cope’s statement that “if a

contract is sufficiently inequitable to meet the test of substantive unconscionability,

then it should not be enforced.” We agree and, for purposes of this appeal, we are

advocating for the application of this test only in circumstances where the

substantively unconscionable clause acts to exculpate the wrongdoer or frustrate

the remedial purpose of a statute. From a public policy standpoint, allowing

exculpatory clauses to be enforced in adhesion contracts because they were not

obtained through additional procedurally unconscionable means sets a terrible

precedent.

Fortunately, the exculpatory clause test is already the law in Florida, just

under a different name. Numerous Florida cases have voided contracts that act

specifically to exculpate the drafter or more generally to frustrate the remedial

purpose of a statute. 18

18 In rare instances, courts will enforce exculpatory clauses in contracts between

sophisticated parties with relatively equal bargaining power, but, even then, only if the exculpatory clause specifically and unambiguously delineates its purpose. See Greater Orlando Aviation Authority v. Bulldog Airlines, 705 So.2d 120 (Fla. 5th DCA 1998). Exculpatory clauses in consumer contracts of adhesion, especially clauses like Sprint’s class action ban that fail to clearly explain their exculpatory effect to the consumer, do not fall in this exception.

For example, in Jersey Palm-Gross, Inc. v. Paper, 658

So.2d 531 (Fla. 1995), a usury case, this Court enunciated a rule of law that a

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lender may not “relieve himself of the pains and penalties visited by law upon such

an act by merely writing into the contract a disclaimer of any intention to do that

which under his contract he has plainly done.” 658 So.2d at 535 (citations

omitted). The Court explained that permitting lenders to contractually immunize

themselves from liability in this way “would undermine public policy as set by the

legislature and defeat the purpose of Florida’s usury statute.” Id.

Likewise, in Rollins v. Heller, 454 So.2d 580, 583 (Fla. 3d DCA 1984), the

court declined to enforce a “limitation of damages” provision in an alarm

company’s contract that would have limited its customer’s FDUTPA damages to

$250.00. Id. The court explained that “any attempt to limit one’s liability for

deceptive or unfair trade practices would be contrary to public policy.” Id. at 585;

see also Tandy Corp. v. Eisenberg, 488 So.2d 927, 928 (Fla. 3d DCA 1986)

(exculpatory clause in sales agreement was unenforceable on public policy grounds

where defendant knowingly violated FDUTPA).19

More recently, the First DCA held that a forum selection clause that would

have effectively prohibited Florida consumers from pursuing their FDUTPA

19 See also In re Twenty Grand Offshore, Inc., 328 F. Supp. 1385, 1386–87 (S.D.

Fla. 1971) (provision that would allow defendant to absolve itself of liability arising from negligence violated public policy); First Pacific Corp. v. Sociedade de Empreendimentos e Construcoes Ltda., 566 So.2d 3, 4 (Fla. 3d DCA 1990) (forum selection clause unenforceable where it “would allow Florida residents to avoid the impact of [Florida’s RICO statute]”).

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claims on a class basis violated Florida public policy. In America Online, Inc. v.

Pasieka, 870 So.2d 170, 171 (Fla. 1st DCA 2004), Florida plaintiffs filed a

putative class action alleging violations of the FDUTPA. The defendant sought to

enforce a contractual forum selection clause that required lawsuits to be brought in

Virginia, which does not permit consumer class actions. Id. at 170. The court

found that, given the “small monetary amounts typically involved . . . most of the

individual plaintiffs likely would not pursue their claims in Virginia.” Id. at 171.

The court therefore refused to enforce the defendant’s forum selection clause on

public policy grounds because “the purpose and effectiveness of the FDUTPA

would be seriously undermined if the claims here were required to be brought in

Virginia.” Id. at 172.

The First DCA followed that decision with S.D.S. Autos, Inc. v.

Chrzanowski, 976 So.2d 600 (Fla. 1st DCA 2007), which held that a class action

ban similar to Sprint’s was unenforceable on public policy grounds. The S.D.S.

plaintiffs filed a putative class action alleging that the defendant, a Lexus

dealership, had violated the FDUTPA by charging a fraudulent $379.70 “fee” in

connection with their purchase of a vehicle. Id. at 603. The defendant moved to

dismiss the complaint on the ground that the plaintiffs had signed leases containing

arbitration clauses with “express class action waivers.” Id. The court rejected this

argument, holding that the “small claims” at issue were “impractical for consumers

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to litigate or arbitrate on an individual basis,” and that the class action ban thus

“effectively prevent[ed]” consumers from vindicating their statutory rights under

FDUTPA. 20 Id. at 608. The First District further noted that “regardless of forum,

FDUTPA plaintiffs may not be precluded from seeking class relief,” and

accordingly held that the defendant’s class action ban was an unenforceable

exculpatory clause that violated Florida public policy. 21

20 The district court distinguished S.D.S. on the ground that its holding applied

only to cases arising under Florida Statute 501.967, which limits attorneys’ fees to the amount “reasonable in light of the amount of the individual’s actual damages,” whereas, in this case, there is no limitation on attorneys’ fees. (Doc. 60 - Pg 7.) This reading of S.D.S. is incorrect for three reasons: First, the S.D.S. court never limited its holding to cases that involve a limitation on attorneys’ fees. Instead, the key to the court’s holding in S.D.S. was the fact that it involved “small claims that are impractical for consumers to litigate or arbitrate on an individual basis but which allegedly involve ‘a large sum of money’ when considered collectively.” 976 So.2d at 608. The S.D.S. court makes it clear that its holding is intentionally broad by stating that “we join numerous other courts in declining to enforce bans on class relief in consumer contracts that give rise to claims under consumer protection statutes.” S.D.S. at 610. The court then goes on to cite many of the same national cases that have held class action bans unenforceable that we have brought to the Court’s attention – none of which involve Florida Statute 501.967. S.D.S. Autos should therefore guide this Court’s analysis.

Id. at 610.

21 S.D.S. conflicts with Fonte v. AT&T Wireless Services, Inc., 903 So.2d 1019 (Fla. 4th DCA 2005) which based its one paragraph holding on this issue on Randolph v. Green Tree Fin. Corp.-Ala., 244 F.3d 814 (11th Cir. 2001), which was decided under Georgia law. Fonte held that FDUTPA did not guarantee an absolute right to bring a class action, and its remedial purpose was not frustrated as long as consumers could bring small claims actions or individual arbitrations and were entitled to seek injunctive and declaratory relief on behalf of other consumers. Fonte is distinguishable on the facts because unlike Sprint’s class action ban, the AT&T clause in Fonte expressly allowed an arbitrator to

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The First District’s reasoning in S.D.S. applies with equal force here.

Sprint’s class action ban is clearly an exculpatory clause because it effectively

prevents a plaintiff from obtaining representation and “vindicating their statutory

rights under FDUTPA.” It is also void as against public policy because it frustrates

the remedial purpose of FDUTPA by limiting the broad declaratory and injunctive

relief provided by Florida Statute §501.211(1). Contract provisions that prevent a

FDUTPA plaintiff from obtaining injunctive or declaratory relief are by

themselves sufficient to frustrate the remedial purpose of FDUTPA and therefore

invalid. S.D.S. at 607; Holt v. O’Brien Imports, 862 So.2d 89 (Fla. 2d DCA

2003).22

“order injunctive or declaratory relief pursuant to an applicable consumer protection statute.” Fonte at 1022 (emphasis in original). In addition, because Fonte did not have the substantial factual record of the instant case, it did not address circumstances where consumers would be unable to obtain representation for nominal individual claims, and instead relied on secondary, non evidentiary hearsay from Alan Kaplinsky, a banking lawyer who was one of the driving forces behind the popularization of arbitration clauses in consumer contracts, hardly an unbiased source. S.D.S. is a better reasoned opinion and the Court should overrule Fonte to the extent it is inconsistent with S.D.S.

22 See also Alterra Healthcare Corp. v. Bryant, 937 So.2d 263, 266 (Fla. 4th DCA 2006), (Arbitration clause that prohibited the recovery of punitive damages and capped non economic damages was unenforceable because it defeated the remedial purpose of Nursing Home Resident’s Rights Act.); Blankfeld v. Richmond Health Care, Inc., 902 So.2d 296, 297 (Fla. 4th DCA 2005) (“arbitration procedure substantially limit[ed] the remedies created by [NHRA], and [was] void as contrary to public policy”) and Alterra Healthcare Corp. v.

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In short, Florida law already voids contract terms on the basis of substantive

unconscionability alone where the offending provision is exculpatory or frustrates

the remedial purpose of the statute. Even though both of these factors have also

been incorporated into the substantive unconscionability prong of the balancing

test, they also provide an independent basis for invalidating inequitable contract

terms because Florida law will not enforce exculpatory clauses or clauses that

frustrate the remedial purpose of a statute, especially consumer protection statutes,

even where there is no procedural unconscionability. 23

Estate of Linton ex rel. Graham, 953 So.2d 574, 578 (Fla. 1st DCA 2007) (arbitration clause “unenforceable if its provisions deprive the plaintiff of the ability to obtain meaningful relief for alleged statutory violations”).

23 Such a holding would be consistent with the opinions of many other jurisdictions that struck exculpatory class action bans without any showing of procedural unconscionability. See Feeney v. Dell, Inc., 908 N.E. 2nd 753, 765 (Mass. 2009) (“Allowing companies that do business in Massachusetts, with its strong commitment to consumer protection legislation, to insulate themselves from small value consumer claims creates the potential for countless customers to be without an effective method to vindicate their statutory rights, a result clearly at odds with our public policy.”); Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006) (Class action ban is unenforceable because it prevents consumers from vindicating their statutory rights.); Fiser v. Dell Computer Corp., 188 P.3d 1215, 1221 (N.M. 2008) (While contract was not procedurally unconscionable, court “nevertheless conclude[d] that the terms [were] unenforceable because there has been such an overwhelming showing of substantive unconscionability.”); Scott, 161 P.3d at 1006 (class action ban unenforceable because “[e]xculpation from any potential liability for unfair or deceptive acts or practices in commerce clearly violates public policy”).

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B. THE BALANCING OR SLIDING SCALE TEST

The second approach used by Florida Courts (and other jurisdictions) is the

“balancing’ or “sliding scale” test explained in Romano v. Manor Care, Inc., 861

So.2d 59 (Fla. 4th DCA 2004):

Most courts take a “balancing approach” to the unconscionability question, and to tip the scales in favor of unconscionability, most courts seem to require a certain quantum of procedural plus a certain quantum of substantive unconscionability. The amount of either may vary… The prevailing view is 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. But they need not be present in the same degree. Essentially a sliding scale is invoked …. the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.

Romano, at 62 (internal quotes and citations omitted). See also Voicestream

Wireless Corp. v. US Communications, Inc., 912 So.2d 34, 39 (Fla. 4th DCA 2005)

(One prong of procedural or substantive unconscionability can outweigh another

provided that there is at least a modicum of the weaker prong.); and Steinhardt,

supra, at 889. See also cases cited in Opinion at 32.

As we noted above, we agree that this test remains viable. We are merely

asking the Court to recognize and codify the already existing exception to this

general rule – that is, where the offending contract term acts as an exculpatory

clause or frustrates the remedial purpose of the statute, procedural

unconscionability is not required.

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Alternatively, the Court should hold that the procedural unconscionability

prong of the balancing test is satisfied where the offending clause is a non-

negotiated provision in a contract of adhesion. See Pasteur Health Plan, Inc. v.

Salazar, 658 So.2d 543, 544 (Fla. 3d DCA 1995) and Hialeah Automotive, 22

So.3d at 592, FN4.

C. THE INDEPENDENT ANALYSIS TEST

This Court should, however, dispense altogether with the test utilized by the

Second District in Belcher v. Kier, 558 So.2d 1039 (Fla. 2nd DCA 1990) (and other

cases cited in Opinion at 33), which rejects the “sliding scale” approach and

assesses procedural and substantive unconscionability independently. In most

instances this is not truly a third test but rather an incomplete application of the

balancing test. Its misapplication by the district court in the instant case serves as a

prime example of why the “independent analysis” test is arbitrary, flawed, and

ultimately unworkable.

Despite identifying numerous factors of procedural unconscionability in

Sprint’s imposition of the class action ban on its customers (a contract of adhesion,

lack of notice, no ability to terminate their contract without rendering their phones

useless), the district court nevertheless found no procedural unconscionability

because of the alleged existence of two badly flawed market alternatives. In doing

so, the court accorded this one factor more weight than all of the other evidence of

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procedural unconscionability combined, so much so that it acted as a “trump card”

that absolved Sprint of all of its procedural violations.

Not only is Florida law devoid of support for the district court’s conclusion

that the existence of a market alternative, no matter how flawed, cures all

procedural ills; Courts outside of Florida have soundly rejected this argument. See

e.g. Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir. 2007).

The district court’s mistake here illustrates the problem of a piecemeal

approach to the procedural unconscionability analysis. Unless the Court wants to

provide exhaustive guidance on what procedural factors should be given greater

weight than others, when factors can be ignored, or how many factors need to be

present in order to move on to the substantive analysis, each trial court will be left

to its own devices in making these determinations, and the only predictable result

will be inconsistency between their decisions. The practical solution to this

problem is to require all courts performing an unconscionability analysis to

evaluate both procedural and substantive unconscionability unless the level of

substantive unconscionability is so great that it would be inequitable to enforce the

offending contract provision – which Florida law already provides for.

Accordingly, we ask the Court to reject the “independent analysis” approach and

affirm the “exculpatory clause” and “sliding scale” approaches set forth above.

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This Court’s answer to the Eleventh Circuit’s first certified question should

therefore be that Florida courts may, where appropriate, invalidate inequitable

contract terms based on their substantive unconscionability alone; however, in

most instances, Florida applies a sliding scale approach where the more

substantively oppressive the contract term, the less evidence of procedural

unconscionability is required to render the term is unenforceable. The Court

should further advise the Eleventh Circuit that Sprint’s class action ban is void

under either test.

2. Is the Class Action Waiver Provision in Plaintiff’s Contract with Sprint Procedurally Unconscionable Under Florida Law?

As a starting point, we reiterate that because Sprint’s class action waiver acts

as an exculpatory clause, a showing of procedural unconscionability should not be

necessary. Nevertheless, there was sufficient procedural unconscionability

involved in the imposition of the class action waiver on customers like Pendergast

to satisfy any of the unconscionability tests applied under Florida law, so the

answer to this question is YES.

The leading Florida case on this issue is Powertel v. Bexley, 743 So.2d 570

(Fla. 1st DCA. 1999), and it is materially indistinguishable from the instant case.

The Powertel Court found the post hoc imposition of an arbitration clause by

Powertel, another cellular telephone company, procedurally unconscionable for the

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following reasons: 1) it was a contract of adhesion that Powertel unilaterally

imposed on its customers in an insert to their monthly telephone bill; 2) Powertel’s

customers did not bargain for it, nor could they reject it; 3) if they terminated their

agreement, their equipment would be rendered useless; and 4) the mail insert did

not give prominent notice of the addition of the arbitration clause. These facts are

identical to the facts in the instant case, with the exception that Pendergast received

NO notice of the offending clause.

Both the district court and the Eleventh Circuit agreed that the Sprint class

action ban was a contract of adhesion. Docket 60, p.4; Opinion, at 37, FN16.

Next, the district court found that “Sprint unilaterally imposed the Class Action

Waiver upon Plaintiff in June 2004, nearly three years into his service plan,

without providing notice of the change until June 2005.”24

These facts clearly constitute more than a “modicum” of procedural

unconscionability and, had the district court properly applied Florida’s balancing

Docket 60, p.4.

(emphasis supplied). Finally, the district court found that “it is undisputed that

Plaintiff’s wireless equipment is non-transferrable, thereby rendering such

hardware useless in the event of service termination." Docket 60, p.4-5.

24 Although having no bearing on the Plaintiff’s rights on his first phone line, the

new contract signed by the Plaintiff in July 2005 made no mention of the class action waiver and is thus analogous to the mail insert provided to the Plaintiff in Powertel, which the court determined was insufficient to place the Plaintiff on notice of the substantial rights that she was giving up.

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test, they would have required the court to move on to the substantive

unconscionability analysis. Instead, the district court misapplied Powertel and,

after highlighting aspects of Sprint’s conduct that were procedurally

unconscionable, decided that the imposition of the class action waiver was not

procedurally unconscionable as a whole and stopped its analysis. This result is a

perfect example of the arbitrariness that occurs when procedural unconscionability

is evaluated separately from substantive unconscionability and illustrates why the

independent analysis test is unworkable and results in arbitrary, inconsistent

results.

Despite being almost factually identical to Powertel, the district court

nevertheless determined that the addition of the class action ban was not

procedurally unconscionable, not by distinguishing the Powertel case factually, but

instead by making an argument that was unequivocally rejected by the Powertel

court: The district court held that the Plaintiff could have simply terminated his

service in July 2005 and then obtained service from one of the two small carriers

that didn’t utilize a similar ban. In the district court’s view, the availability of an

alternative carrier, irrespective of that carrier’s own shortcomings and tortious acts,

rendered moot all of the procedural unconscionability that predated this date.

This analysis is flawed for two primary reasons. First, Powertel explicitly

rejected this argument, holding that when a consumer has equipment that only

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works on one carrier’s network (in this case, Sprint’s), the ability to change carriers

will not remove the procedural unconscionability – “They purchased equipment

that works only with the Powertel service … Hence it is no answer to say that the

customers can simply switch providers.” Powertel at 575 (emphasis supplied).25

The district court acknowledged that the Plaintiff’s first phone would have been

rendered useless in the event of service termination and not subject to any refund,

yet in direct contravention of Powertel, its answer was that the Plaintiff could

simply switch providers, even though it was “inconvenient.” Docket 60, p.4-5.26

The reasoning behind Powertel’s holding is clear when applied to the class

as a whole. Florida’s consumer protection laws weren’t written to protect any

single customer, but to deter illegal conduct against all consumers. In short, we

25 The fact that the Powertel plaintiff would have had to change her phone

number, while Pendergast could have ported his to a new carrier would not have changed the outcome in Powertel. This was merely one of many factors that the Court noted to be procedurally unconscionable and is more than offset by the fact that Pendergast received no notice of the change in terms, while the Powertel plaintiff did.

26 Pendergast’s addition of a second line in 2005 is entirely irrelevant to this analysis. Pendergast could have avoided application of the class action ban to his second line by terminating within 14 days not because of the addition of the class action ban in June 2004, but because the contract gave him 14 days to void the contract on his new line. This termination would have had no effect on the service agreement for his first line, on which he had already accepted, albeit unknowingly, the class action ban, and it would not have entitled him to refund for the telephone on that line. Finally, all of the complained of roaming charges occurred on Pendergast’s first line.

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aren’t talking about only one Sprint customer. We are talking about 17 million

customers who, if they chose to reject the class action ban, would have to throw

out 17 million phones. And those customers still within their original service term

would be subject to early termination fees, as the May 2001 terms and conditions

did not have an “out clause” that allowed customers to terminate without penalty if

Sprint unilaterally changed the terms of their bargain.27

Let’s take a moment to examine what would have been required of a Sprint

customer in June of 2004 to avoid the effect of the offending class action ban.

First, the customer would have to note the addition of the ban (which would have

been extremely difficult given Sprint’s failure to notify its customers of the

change) and understand the practical import of the offending clause.

28

27 Powertel voided the class action ban even though it noted that only “some

customers” may suffer inconvenience and “many customers” may have had no “economically feasible alternative”. The Powertel Court's decision not to use the word “all” when referring to those groups demonstrates clearly that inconvenience and lack of feasible alternatives are not mandatory or dispositive factors in determining whether the loss of equipment by an entire class of customers is procedurally unconscionable or not. In both Powertel and here, it is undisputed that “all” consumers who terminated service would have lost the use of their equipment.

Next, the

28 It is nothing more than a legal fiction to suggest that the average lay person, who very likely would never even consider the use of or need for a class action if she were wronged by Sprint, would understand that the presence of this ban almost assuredly prevents her from obtaining an attorney to vindicate her individual claims as well, as the record demonstrates. Docket 42-6 to 42-10 and 54-16 through 26. See also Gainesville Healthcare, Inc. v. Weston, 857 So.2d 278, 284 (Fla. 1st DCA 2003) (One factor of procedural unconscionability is

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customer would have to be willing to render his phone useless, transfer all of the

contact information contained therein to a new phone, and purchase new

equipment with a new carrier.

Then the customer would have to research all of Sprint’s competitors to find

out which ones don’t utilize a similar class action ban. He would have discovered

that all of the national carriers, which controlled over 90% of the market (Sprint,

Verizon, AT&T/Cingular, and T-Mobile), all had class action bans, so he had no

comparable national carrier to go to. Docket 42-2, and 54-7. If that wasn’t

disincentive enough, he would find that of the seven smaller carriers operating in

the United States in 2004 (Metro PCS, Alltel, Suncom, Cricket, US Cellular,

TracFone and Virgin Mobile), five had terms and conditions containing class

action bans, and, as we explained in detail in the Statement of Facts, the remaining

two (TracFone and Virgin Mobile) offered no reasonable alternative to Sprint.

Docket 42-2, and 54-6.

whether the consumer had a reasonable opportunity to understand the terms of the contract.) Even if she consulted with an attorney on the meaning of the ban, the best advice she could get from that attorney, despite the oceans of ink and forests of paper expended on the issue, is that she may or may not be prohibited from bringing a class action to redress an ongoing wrong, depending on the jurisdiction, and the availability of this remedy would control whether or not she could bring a claim. We think it axiomatic that a consumer should not have to consult with an attorney before entering into a basic consumer transaction.

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Finally, the customer would have to buy a new phone, and sign a new

contract with another carrier, locking them into a new two-year term. Now, repeat

this analysis for each of Sprint’s 17 million customers. Sprint would have this

Court place the burden of avoiding unfair contract terms on every one of its 17

million customers, and have them go through this process 17 million times, instead

of simply preventing Sprint from imposing such unfair terms on its customers in

the first place.

The second flaw in the district court’s holding is the enormous weight it

conferred upon the existence of market alternatives. The district court seemed to

be suggesting the adoption of a bright line rule where the existence of any

competitor offering cellular service without a class action ban nullifies all of

Sprint’s procedural and substantive unconscionability, no matter how great. There

is no support for this position in Powertel or anywhere else in Florida law.

As a starting point, the presence of market alternatives is only relevant to a

consumer selecting a vendor for the first time, because at that point they have no

investment in equipment and, thus, no sunk costs motivating them to choose one

vendor over another. But, even then, the existence of market alternatives does not

act as an trump card that negates all other forms of procedural unconscionability,

as the district court treats it. We know that in 1999 the Powertel plaintiff had a

choice of other carriers, Sprint among them, that did not bar class relief, yet the

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court still found Powertel’s actions to be procedurally unconscionable and allowed

the class action suit to proceed. And it goes without saying that the plaintiffs in

Hialeah Automotive, supra and Romano, supra had many other options for car

dealerships and nursing homes; nevertheless, the issue of market alternatives was

not even raised in those opinions, let alone found to be disqualifying.29

Because Florida law on this issue is sparse, it’s useful to examine cases from

other jurisdictions that have addressed this issue more thoroughly, especially the

California Courts who have examined it in numerous cellular carrier class actions.

In Gatton v. T-Mobile USA, Inc., 152 Cal.App.4th 571 (2007), the court explained

that the availability of market alternatives “decreases the extent of procedural

unconscionability but does not negate the oppression and obligate courts to enforce

the challenged provisions regardless of the extent of substantive unfairness. The

existence of consumer choice is relevant but is not determinative of the entire

issue.” Gatton at 583. The Ninth Circuit reached the same conclusion in Ting v.

29 The issue has been specifically addressed in both federal and state trial level

decisions. In re Nationsrent Rental Fee Litigation, 2009 WL 636188, *9 (S.D. Fla. Feb 24, 2009) (the fact that alternative equipment rental options were available would not prohibit a finding of procedural unconscionability); and Reuter v. Davis, 2006 WL 3743016, *3, No. 502001CA001164XXXXMB (Fla. 15th Cir. Dec 12, 2006) (two out of six check cashing companies in the market did not utilize class action bans, but their existence did not relieve the contract of its procedural unconscionability, even though class action waiver was present at the inception of the contract.)

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AT&T, 319 F.3d 1126 (9th Cir. 2003) holding that even if an alternative carrier

existed, its existence would fail to override the other indicia of procedural

unconscionability in AT&T imposition of a mandatory arbitration clause. Ting at

1149.

In Shroyer v. New Cingular Wireless Services, Inc., 498 F.3d 976 (9th Cir.

2007), the Court explained how the approach the district court applied to this case

has been rejected on numerous occasions:

In three opinions subsequent to both Discover Bank and all of the cases to which Cingular cites, we have rejected Cingular's “meaningful alternatives” or “marketplace alternatives” argument. See Douglas v. U.S. Dist. Court for the Central Dist. of Cal., 495 F.3d 1062, (9th Cir. 2007) (per curiam); O'Melveny & Myers, 485 F.3d at 1074-75; Nagrampa, 469 F.3d at 1283. In Nagrampa, after reviewing California case law, this court, sitting en banc, “noted that California ‘has rejected the notion that the availability ... of substitute ... services alone can defeat a claim of procedural unconscionability.’ ” Douglas, 495 F.3d 1062 (quoting Nagrampa, 469 F.3d at 1283); accord O'Melveny & Myers, 485 F.3d at 1074-75 (same)….. See, e.g., Nagrampa, 469 F.3d at 1283; Ingle, 328 F.3d at 1172 (“We follow the reasoning in Szetela ... in which the California Court of Appeal held that the availability of other options does not bear on whether a contract is procedurally unconscionable.”). In fact, in a recent decision finding a cellular phone company's class arbitration waiver unconscionable, the California Court of Appeal held that “absent unusual circumstances, use of a contract of adhesion establishes a minimal degree of procedural unconscionability notwithstanding the availability of market alternatives,” and explained that “[t]he Ninth Circuit, sitting en banc in Nagrampa [ ], reached the same conclusion.” Gatton, 152 Cal.App.4th at 585, 61 Cal.Rptr.3d 344. (Some parallel citations omitted)

Shroyer, 498 F.3d at 985.

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This issue provides yet another strong argument in favor of the balancing

test as it allows for the Court to give appropriate weight to each of the factors.

Under the district court’s “trump card” analysis, well over 90% of cell phone

customers in the country would be subject to whatever substantively

unconscionable or exculpatory contract terms their carriers sought to impose upon

them simply because of the existence of one small regional competitor that chose

not to impose such a condition. In the context of employment contracts,

employees would be subject to whatever offensive clauses their employers chose to

foist upon them because it would be impossible for the employee to prove that they

could not have found another job that didn’t require agreement to such a term. In

fact, under the district court’s analysis, as long as there is a market alternative, no

contract term is too onerous and no procedure for obtaining it is unconscionable.

And if a Florida court has to find both procedural and substantive

unconscionability in every instance, there would be no way to void even the most

substantively egregious terms, because they cannot be found procedurally

unconscionable as long as there is an alternative somewhere in the market.

Rejection of this bright line rule yields a far more equitable result. For

example, if Sprint had been the only carrier to utilize the class action ban, this

would provide some mitigation, reducing the quantum of procedural

unconscionability. But, where, as here, the use of the class action ban is essentially

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industry standard, its otherwise substantial procedural unconscionability should not

be absolved simply because of the mere existence of a minor and deeply flawed

alternative provider.

As a final point, we note that the majority of the argument above has been

made in an effort to demonstrate that even if this Court were to adopt the

“independent analysis” test used by the district court, there still exists sufficient

procedural unconscionability to satisfy this prong and move onto substantive

unconscionability. Under the balancing test, however, the standard is far less

exacting,30

Under any of the three tests set forth above, the answer to the Eleventh

Circuit’s second certified question – Is the class action waiver provision in

and under the exculpatory clause test, no procedural unconscionability

is needed at all.

30 See Palm Beach Motor Cars Limited, Inc. v. Jeffries, 885 So.2d 990 (Fla. 4th

DCA 2004) (because the offending provision was contained on the back of the sales agreement, was in small type, and was not brought to the attention of the customer, it was deemed procedurally unconscionable); Hialeah Automotive v. Basulto, 22 So.3d 586 (Fla. 3rd DCA 2009) (because staff failed to mention the presence of the arbitration clause when translating English Contract to Spanish, it was procedurally unconscionable); Romano v. Manor Care, Inc., 861 So.2d 59 (Fla. 4th DCA 2004) (contract formation was procedurally unconscionable because resident’s husband did not understand the rights he was giving away, and was not told that his failure to sign the arbitration agreement would have no effect on his wife’s care in the nursing home.); and Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, Ltd., 541 So.2d 1121 (Fla. 1989) (Unilateral rent increase imposed on homeowners, after initial rent agreement had been entered into, was procedurally unconscionable).

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Plaintiff’s contract with Sprint procedurally unconscionable under Florida Law – is

clearly YES.

3. Is the Class Action Waiver Provision in Plaintiff’s Contract with Sprint Substantively Unconscionable Under Florida Law?

Obviously a great deal can be written in response to this question, but were

we required to answer it in one paragraph, we would simply note that the district

court itself has already answered it in the affirmative. The district court order

stated “a consumer who suffers $20.00 in damages may have to forego his claim

for lack of adequate representation, regardless of the probability of victory or

relative merits to the dispute. Clearly, defendants, such as Sprint, should not be

permitted to insulate themselves from meritorious consumer lawsuits, especially

given the public utility nature of wireless service.” Docket 60, p.6, FN8. This is

the essence of substantive unconscionability.

Florida State Court jurisprudence on the substantive unconscionability of

class action bans has been quite uniform. All of the cases that have reached this

issue have found class action bans to be substantively unconscionable, starting

with Powertel Inc. v. Bexley, 743 So.2d 570, 576 (Fla. 1st DCA 1999):

By requiring arbitration of all claims, Powertel has precluded the possibility that a group of its customers might join together to seek relief that would be impractical for any of them to obtain alone. Again, this is an advantage that inures only to Powertel…. As we have explained, the arbitration clause is invalid as to both the procedural and substantive components of unconscionability.

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Powertel at 576-77. (emphasis supplied).

Powertel was followed by Bellsouth Mobility LLC v. Christopher, 819 So.2d

171 (Fla. 4th DCA 2002):

The contract on its face supports that the arbitration clause is, at a minimum, substantively unconscionable because it requires consumers to give up many specific legal remedies….It also expressly removes Bellsouth’s exposure to a class action suit which, in this case, may be warranted due to the numerosity of the small claims asserted, the common questions of law and fact raised by the claims, the typicality of the claims, and Christopher’s status as a fair representative of the class.

Bellsouth at 171. (emphasis supplied); and then by Reuter v. Davis, 2006 WL

3743016 (Fla. Cir. Ct. 2006):

Based on the evidence presented, the Court concludes that the class action waivers here are unconscionable. While the evidence of procedural unconscionability is relatively slight, the evidence of substantive unconscionability is overwhelming. The chance that Ms Reuter could have obtained competent counsel absent the possibility of class action status or successfully recognized a potential claim that she could pursue without benefit of counsel is effectively zero. Enforcement of the class action waivers in arbitration would be tantamount to depriving Ms Reuter of any claims against Check ‘n Go.

Reuter at *5 (citations omitted). 31

31 Still other cases have rejected clauses that would ban class actions because they

frustrate the remedial purpose of a statute. As explained elsewhere in this brief, frustration of the remedial purpose of a statute is both an element of substantive unconscionability and an independent basis to void a contract provision. See e.g. America Online v. Pasieka, 870 So.2d 170, 171 (Fla. 1st DCA 2004) (refusing to enforce forum selection clause that would have transferred plaintiff’s FDUTPA claims to Virginia because Virginia law did not permit

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Thus, the overwhelming weight of Florida authority holds class action bans

like Sprint’s to be substantively unconscionable. In the only instance where the

Eleventh Circuit opined on how Florida Courts would view this issue, it followed

Powertel and held that class action bans are unconscionable, albeit in an

unpublished opinion. Rollins, Inc. v. Garrett, 177 Fed.Appx. 968 (11th Cir. 2006):

Under Florida law, a consumer contract that prohibits class arbitration is unconscionable because it “precludes the possibility that a group of its customers might join together to seek relief that would be impractical for any one of them to obtain alone.” Powertel, Inc. v. Bexley, 743 So.2d 570, 576 (Fla. 1st DCA 1999).

Rollins at 968-969.

In Dale v. Comcast, 498 F.3d 1216 (11th Cir. 2007), the Eleventh Circuit

invalidated an analogous class action ban under Georgia law. In doing so, the

Court identified a number of factors that have been examined in jurisprudence on

this issue, among them are the one sidedness of the terms, the imbalanced cost of

the claim when compared to the potential recovery, the ability to obtain legal

representation, the exculpatory effect of the class action ban, and related public

such claims to be pursued as a class action.); Reeves v. Ace Cash Express, Inc., 937 So.2d 1136, 1138 (Fla. 2d DCA 2006) (“offending” class action waiver in FCCPA claim severable.); and S.D.S. Autos, Inc. v. Chrzanowski, 976 So.2d 600, 607 (Fla. 1st DCA 2007) (Class action ban void because it frustrated the remedial purpose of FDUTPA); but see Fonte v. AT&T Wireless Servs., Inc., 903 So.2d 1019, 1027 (Fla. 4th DCA 2005) (Did not address substantive unconscionability but held that class action ban did not frustrate remedial purpose of FDUTPA)

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policy concerns, such as whether the ban frustrates the remedial purpose of a

statute. Dale at 1224. Sprint’s class action waiver violates each of these factors.

First, Sprint’s class action ban is essentially one sided. As Judge Padovano

noted in Powertel, “this is an advantage that inures only to Powertel. The

arbitration clause precludes class litigation by either party, but it is difficult to

envision a scenario in which that would work to Powertel's detriment. Powertel at

576. 32

Second, the cost to an individual plaintiff of vindicating his or her claim is

overwhelmingly outweighed by the both the risks of non-recovery and the limit of

the plaintiff’s potential recovery in arbitration or small claims court. As we

The North Carolina Supreme Court put this best in Tillman v. Commercial

Credit Loans, 655 S.E.2d 362, 371 (NC 2008) when it quoted Anatole France's

observation in The Red Lily: “‘the majestic equality of the laws forbid[s] rich and

poor alike to sleep under the bridges, to beg in the streets, and to steal their

bread’…[thus] [a]lthough the arbitration rider with majestic equality forbids

lenders as well as borrowers from bringing class actions, the likelihood of the

lender seeking to do so against its own customers is as likely as the rich seeking to

sleep under bridges.”

32 See also Gatton v. T-Mobile USA, Inc., 61 Cal.Rptr.3d 344 (Cal. App. 1 Dist.

2007) (Class action bans are “indisputably one-sided” because companies typically do not sue their customers in class action lawsuits.)

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thoroughly detailed in our statement of facts, proving the merits of this claim will

require substantial discovery not authorized by the terms of the arbitral forum, and

expensive expert testimony.

If the Plaintiff decided to proceed in small claims court, the preparation of

the case and the hiring of the expert witnesses with the specialized knowledge

necessary to prove the plaintiff’s case would easily cost more than $100,000.

Docket 42-6. Under these circumstances, Dale notes that, “the cost of vindicating

an individual subscriber’s claim, when compared to his or her potential recovery, is

too great.” Dale at 1224.

Third, the FDUTPA claim is the only one of the Plaintiff’s six claims that

provides for prevailing party attorney’s fees and even on that claim, the award of

those fees is only discretionary.33

33 Another discouraging factor to potential attorneys is that, unlike fee awards in

class actions, attorneys’ fee multipliers are prohibited in FDUTPA claims. See Corvette Shop & Supplies, Inc. v. Coggins, 779 So.2d 529, 531 (Fla. 2d DCA 2001).

See Fla. Stat. §501.2105(1) (“the prevailing

party…may receive his or her reasonable attorney's fees and costs from the

nonprevailing party.”) Thus, a FDUTPA claim is not analogous to the Eleventh

Circuit cases that predated Dale which upheld class action bans under certain

circumstances. Each of those cases involved claims that, unlike Pendergast’s, were

not of nominal value, and each claim was brought under statutes that provided for

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the automatic and mandatory award of attorneys’ fees to the prevailing party, not a

discretionary fee award like FDUTPA now provides.34 This distinction is

important because the undisputed evidence in this case shows that the mere

possibility that a plaintiff may recover attorney’s fees is insufficient to overcome

the disincentives to finding competent counsel created by the class action waiver.35

More importantly, not only does the FDUTPA fee provision not act as an

incentive for attorneys to take individual claims, the risk of exposing an individual

plaintiff to tens of thousands of dollars in defense fees on a complicated small

claim acts as a disincentive. No ethical attorney would expose his client to such a

risk for such a nominal recovery, especially in light of the cost to litigate and the

risk of not prevailing. Thus, Sprint’s class action ban has the perverse effect of

discouraging the use of the very statute designed to protect consumers against

unlawful behavior. Under Florida law, statutes are not to be interpreted in a

34 Randolph v. Green Tree Fin. Corp.-Ala., 244 F.3d 814 (11th Cir. 2001)

(mandatory fees under the Truth in Lending Act); Jenkins v. Fist Am. Cash Advance of Georgia, L.L.C., 400 F.3d 868 (11th Cir. 2005) (mandatory fees under RICO); and Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359 (11th Cir. 2005) (mandatory fees under FLSA).

35 See attorney declarations at Docket 42-6,7,8,9,10. See also Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir.2006) (rejecting the contention that the availability of attorneys' fees provides the necessary incentive for private enforcement actions in individual nominal value cases.)

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manner which would lead to an absurd result. See Williams v. State, 492 So.2d

1051, 1054 (Fla. 1986).36

For these reasons, this argument has rightly been rejected in Florida as well

as in numerous jurisdictions outside of the state. See Scott v. Cingular Wireless,

161 P.3d 1000 (Wash. 2007) (private actions by private citizens are integral part of

consumer protection act enforcement); Cooper v. QC Financial Services, 503

F.Supp.2d 1266 (D. Ariz. 2007); Kristian v. Comcast, 446 F.3d 25 (1st Cir. 2006);

and Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005).

Sprint offered no evidence to rebut the evidence showing that class action

bans will result in the death of private enforcement. Instead, Sprint argues that

government action alone is a sufficient substitute. The Legislature, of course,

allowed for the private right of action under FDUTPA. Enforcing the class action

ban would effectively allow corporations to re-write the statute. Clearly, this can’t

be permitted.

37

36 See also Muhammad v. County Bank of Rehoboth Beach, 912 A.2d 88, 100 (NJ

2006) (“such a perverse result would encourage under-enforcement of the very statutes that the Legislature has signaled as warranting strenuous enforcement.”)

Sprint and

37 In fact, in Scott, supra, in Muhammad v. County Bank of Rehoboth Beach, 189 N.J. 1, 912 A.2d 88 (2006), and in Kucan v. Advance America, 660 S.E.2d 98 (N.C. App. 2008), the Attorneys General of Washington, New Jersey, and North Carolina, respectively, filed amicus curiae briefs imploring the courts to prohibit the use of class action bans in consumer contracts because private enforcement actions are necessary to curb corporate misconduct and foster a

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indeed the Eleventh Circuit dismiss these cases and amicus briefs as “having no

bearing on this case.” (Opinion, at 48 FN24). We respectfully join the First

District Court of Appeal in disagreeing with this assessment.

In S.D.S. Autos, Inc. v. Chrzanowski, supra, the First District cited to

Kristian v. Comcast, supra, to make the exact same point made in each of the

above cited cases and in each of the Attorneys General amicus briefs, namely that

“FDUTPA [like the antitrust statute at issue in Kristian] provides for public and

private enforcement alike.” S.D.S. at 609:

“[W]hen Congress enacts a statute that provides for both private and administrative enforcement actions, Congress envisions and role for both types of enforcement” and that “weakening one of these enforcement mechanisms seems inconsistent with the Congressional scheme.”

S.D.S. at 609, citing Kristian at 59. The S.D.S. court continues, echoing the arguments from the cases above,

“public enforcement resources are necessarily limited. Reflecting this reality – and

against the backdrop of class action availability – the act [FDUTPA] created a

fair marketplace. Docket 54-8, 9, and 10. We ask this Court to review the arguments we excerpted in our initial 11th Circuit brief. We had to excise them here due to space considerations, but want to stress their importance.

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private cause of action for consumers aggrieved by FDUTPA violations.” S.D.S. at

610. 38

There are two other obvious flaws in Sprints argument that public

enforcement is sufficient to protect consumer rights. First, the plain language of

Sprint’s terms and conditions prohibits Sprint’s customers from bringing or being a

part of any class action, regardless of forum.

39

38 In a final attempt to dismiss the import of this authority, both Sprint and the

Eleventh Circuit cite to Judge Seitz’s previous decision in Rivera v. AT&T Corp., 420 F.Supp.2d 1312 (S.D. Fla. 2006), which held that the possibility of public enforcement provided an adequate substitute for private enforcement. Yet even though Judge Seitz had the opportunity to make the same finding here, she chose not to do so. Instead, it appears that Judge Seitz changed her mind on this issue. In her discussion of substantive unconscionability, she noted that bans like Sprint’s can act as exculpatory clauses because they prevent individuals from obtaining representation regardless of the merits of their claim. Judge Seitz made this statement despite her clear knowledge of, and past reliance on, the existence of public remedies. Thus, similar to the national trend, it appears that the opinions of Judge Seitz on this matter are evolving in the direction of unconscionability. Docket 60, p . 6, FN 8.

39 “[The customer waives] any right . . . to either join a claim with the claim of any other person or entity, or assert a claim in a representative capacity on behalf of anyone else in any lawsuit or arbitration or other proceeding.” Docket 33-19, p. 24.

Thus, a consumer who participates

in a class action brought by the attorney general is violating the terms of his

agreement. Second, in every case cited above where a court found the class action

ban to substantively unconscionable, the plaintiffs had the same ability to seek

public enforcement of their rights, but this fact did not affect the ruling in any way.

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Sprint suggests that the mere possibility of public enforcement removes the

otherwise substantial substantive unconscionability from the class action ban.

Because the possibility of public enforcement is always present, were that the case,

then the only contract term that would ever be substantively unconscionable would

be one that prohibits public enforcement. The natural result of such a ruling would

be the end of private consumer class actions -- which is, of course, Sprint’s goal, as

Sprint is well aware that the limited resources of government enforcement agencies

acts as a natural constraint on their ability to check unlawful market behavior.

Therefore, the answer to the Eleventh Circuit’s third certified question is

also YES – Sprint’s class action ban is substantively unconscionable under Florida

law.

4. Is the Class Action Waiver Provision in Plaintiff’s Contract with Sprint Void under Florida Law For Any Other Reason?

The answer to this question is also a resounding YES. First, Sprint’s class

action ban is void under Florida law because it acts as an exculpatory clause, as

discussed at length above. This argument is clearly summarized in Thibodeau v.

Comcast Corp., 912 A.2d 874 (Pa. Super. 2006), in which the Pennsylvania

Superior Court rejected Comcast’s class action ban:

No individual consumer possibly could or ever will individually litigate most consumer claims. The cost of lawyers, fees, and expert witnesses makes individual lawsuit or arbitration so completely impractical as to be fairly and properly characterized as impossible.

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It is only the class action vehicle which makes small consumer litigation possible. Consumers joining together as a class pool their resources, share the costs and efforts of litigation and make redress possible. Should the law require consumers to litigate or arbitrate individually, defendant corporations are effectively immunized from redress of grievances.

Thibodeau at 885. (emphasis supplied)

Judge Padovano reached the same conclusion in Powertel:

The arbitration clause also effectively removes Powertel's exposure to any remedy that could be pursued on behalf of a class of consumers. Class litigation provides the most economically feasible remedy for the kind of claim that has been asserted here. The potential claims are too small to litigate individually, but collectively they might amount to a large sum of money. The prospect of class litigation ordinarily has some deterrent effect on a manufacturer or service provider, but that is absent here. By requiring arbitration of all claims, Powertel has precluded the possibility that a group of its customers might join together to seek relief that would be impractical for any of them to obtain alone.

Powertel at 576.

It is inarguable that individual actions against Sprint will be far too few in

number to have any impact on Sprint’s market behavior. As Judge Richard Posner

aptly noted, “the realistic alternative to a class action is not 17 million individual

suits, but zero individual suits, as only lunatic or fanatic sues for $30.” Carnegie v.

Household Int’l, Inc., 376 F.3d 656, 661 (7th Cir. 2004). As noted before, but

worth repeating, the district court here agreed: “[a] consumer who suffers $20 in

damages may have to forego his claim for lack of adequate representation,

regardless of the probability of victory or relative merits to the dispute. Clearly,

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defendants, such as Sprint, should not be permitted to insulate themselves from

meritorious consumer lawsuits, especially given the public utility nature of

wireless service.” Docket 60, p. 6, FN8

The undisputed expert evidence below, in the form of affidavits from sixteen

attorneys, demonstrated that there is no market for attorneys willing to take

negative value claims like the Plaintiff’s. (Docket 42, 6-10 and Docket 55, 16-26)

Sprint offered no evidence or argument to rebut this at the trial level or in the

Eleventh Circuit. In Dale, this fact was essentially dispositive:

Relying on unopposed expert evidence presented by the plaintiffs, the court found that the bar on class arbitration threatens this presumption given the “complexity of an antitrust case generally, and the complexity and cost required to prosecute a case against Comcast specifically.” “[W]ithout some form of class mechanism-be it class action or class arbitration-a consumer antitrust plaintiff will not sue at all.” Accordingly, the court struck down the class arbitration waiver, concluding that “Comcast [would] be essentially shielded from private consumer antitrust enforcement liability, even in cases where it has violated the law.”

* * * This will allow Comcast to engage in unchecked market behavior that may be unlawful. Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small value claims. (citations omitted)

Dale at 1223- 1224, citing Kristian v. Comcast, 446 F.3d 25 (1st Cir. 2006).

The analysis here is almost identical. The cost of vindicating an individual

claim like Pendergast’s is far too great when compared to his potential recovery

and, for the unrebutted reasons explained in the numerous affidavits filed below, it

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will be difficult if not impossible for a customer like Pendergast to obtain

individual representation. Sprint’s class action ban – especially when read in

conjunction with the limitation of liability provisions in its contract – is therefore

effectively an exculpatory clause, and as such is impermissible under Florida law.

Sprint’s class action ban is also void as against public policy because it

frustrates the remedial purpose of FDUTPA in not one but two separate ways.

First, returning to the First District’s well reasoned opinion in S.D.S. Autos, Inc. v.

Chrzanowski, 976 So.2d 600 (Fla. 1st DCA 2007), class action bans like Sprint’s

frustrate the remedial purpose of FDUTPA because “the legislature enacted

FDUTPA ‘to protect not only the rights of the litigants, but also the rights of the

consuming public at large.’” S.D.S. at 607 “FDUTPA does not exist solely for the

benefit of the individual parties, and is instead design to afford a broader protection

to the citizens of Florida” Id., citing to Davis v. Powertel, Inc., 776 So.2d 971, 975

(Fla. 1st DCA 2000). In enacting FDUTPA, “the legislature was necessarily aware

of class actions’ role in deterring future FDUTPA violations by effectively

redressing past violations.” S.D.S. at 610.

Here, as in S.D.S., limiting or blocking an individual consumer’s ability to

obtain representation for a FDUTPA claim by taking away class actions would

“distort the statutory scheme, undermine FDUTPA’s private enforcement

mechanism, and … make the relief the statute contemplates unavailable as a

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practical matter.” S.D.S. at 610. Sprint’s class action ban must therefore be found

void as against public policy.

Second, Sprint’s ban also frustrates FDUTPA because it limits the broad

declaratory and injunctive relief provided by Florida Statute §501.211(1).

FDUTPA expressly authorizes a litigant to obtain “declaratory and injunctive relief

even if those remedies might not benefit the individual consumers who filed the

suit.” S.D.S. at 607. Contract provisions that prevent a FDUTPA plaintiff from

obtaining injunctive or declaratory relief are by themselves sufficient to frustrate

the remedial purpose of FDUTPA and therefore invalid. Holt v. O’Brien Imports,

862 So.2d 89 (Fla. 2d DCA 2003), accord Powertel, supra.

Here, in addition to damages, Pendergast seeks declaratory and injunctive

relief on behalf of all class members to prevent Sprint from continuing its unlawful

practice of charging roaming fees for calls made within Sprint’s coverage areas.

However, Sprint’s Terms and Conditions, prohibit the plaintiff from “asserting

[any] claim in a representative capacity on behalf of anyone else in any lawsuit,

arbitration, or other proceeding.” Docket 33-18, at 25. Therefore, because Sprint’s

class action ban also prohibits an arbitrator from providing injunctive relief to

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anyone other than the plaintiff, it frustrates the broad remedial purpose of

FDUTPA and is thus unenforceable for that reason alone.40

40 As a final point, we would note that Sprint provided no new consideration to its

customers when it added the class action ban on June 30, 2004, and it should be void for that reason alone. The ban was added under the May 2001 “changes to agreement” clause which had no mutuality of obligation. Under the clause, Sprint had the right to change the agreement at any time, for any reason, but the consumer could “not modify the agreement except for [their] service plan.” Docket 33-15, p.2. When Sprint changed its terms and conditions on June 30, 2004, to add the offending class action waiver, it did so without notice and without consideration. Under Florida law, modification of contracts must be supported by new consideration as well as the consent of both parties. See, e.g., New Kirk Construction Corp. v. Gulf County, 366 So.2d 813, 815 (Fla. 1st DCA 1979). Sprint’s contract modifications were supported by neither. Oddly, none of the cases addressing the viability of class action bans appears to address this rather stunning deviation from the accepted law of contracts. If a vendor can change the terms of its consumer contract at any time, for any reason, without notice, then they aren’t actually a party to that contract. Only the consumer is.

VI. CONCLUSION

For the reasons set forth above, we ask the Supreme Court to answer the

certified questions as follows: 1) Florida law utilizes a balancing test in evaluating

unconscionability of a contract term, except in circumstances where the offending

term is exculpatory, or frustrates the remedial purpose of a statute, in which case,

there is no requirement of procedural unconscionability; 2) Yes; 3) Yes; and 4)

Yes, the class action ban is void because it acts as an exculpatory clause and

frustrates the remedial nature of FDUTPA.

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VII. CERTIFICATE OF SERVICE

I certify a copy of the foregoing was filed with the Clerk of the Florida

Supreme Court by electronic filing and served by U.S. mail on March 17, 2010 to:

Samuel Alberto Danon [email protected] Corey A. Lee [email protected] HUNTON & WILLIAMS Attorneys for Appellees/Defendants 1111 Brickell Avenue, Suite 2500 Miami, Florida 33131 Telephone: 305/810-2500 Facsimile: 305/810-2460 David E. Mills (pro hac vice) [email protected] DOW LOHNES, PLLC 1200 New Hampshire Ave., N.W. Suite 800 Washington, DC 20036 Telephone: 202/776-2865 Facsimile: 202/776-2222 Daniel Prichard (pro hac vice) DOW LOHNES, PLLC 6 Concourse Parkway, Suite 1800 Atlanta, GA 30328-6117 Telephone: 770/901-8910 Facsimile: 770/730-6130




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VIII. CERTIFICATE OF COMPLIANCE

WE HEREBY CERTIFY that this brief was prepared in 14-point Times new

Roman font.

By: ________________________

DOUGLAS F. EATON

supreme court of florida case no. sc-10-19 · case no. sc-10-19 . james pendergast, lower tribunal...

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