Friday, January 29, 2010

Freedman v. Comcast Corporation (Ct. of Special Appeals)

Filed: January 28, 2010.
Opinion by Judge J. Matricciani.


1. Defendant's (a) filing of a motion for summary judgment that sought a judicial determination on the merits of the action, (b) request for the court to instruct the arbitrator to hear plaintiff's claims on an individual basis, and (c) attempt to remove to federal court did not constitute a waiver of defendant's right to compel arbitration of claim.

2. The presence of a meaningful choice to enter into an arbitration provision precludes the need for a court to analyze whether an arbitration provision is a contract of adhesion in order to determine whether the provision is procedurally unconscionable.

Facts: Plaintiff claimed defendant violated the 1997 Maryland Wiretapping and Electronic Surveillance Act, alleging the various phone calls he made were recorded without warning. After several pleadings, the Circuit Court denied defendant's motion to dismiss but granted its motion to compel arbitration. Plaintiff appealed the Circuit Court's decision to compel arbitration.

On appeal, plaintiff challenged the validity of the arbitration provision, arguing waiver and unconscionability, among other theories. The Court of Special Appeals denied the appeal after construing the plain terms of the arbitration provision.


1. Waiver.

The plaintiff contended the defendant waived its right to arbitration because defendant (a) filed an alternative motion for summary judgment in conjunction with one of its motions to dismiss, (b) requested the court instruct the arbitrator to hear plaintiff's claim on only an individual basis, and (c) sought to remove the case to federal court.

The Court recited prior cases regarding waiver, stating "the intention to waive must be clearly established and will not be inferred from equivocal acts or language . . . Thus, waiver is a question of intent that ordinarily turns on the factual circumstances of each case."

The Court found plaintiff relied "on a misstatement of federal case law" to argue that a party filing a motion for summary judgment, which seeks judicial determination on the merits of the action, has waived the right to arbitration. Rather, the Court noted that a motion for summary judgment could waive arbitration if it approached a "voluminously documented defense." Here, defendant's motion to dismiss relied on a single document outside the pleadings, a Maryland Public Service Commission certificate, to argue defendant was exempted by the statute that gave rise to plaintiff's claims. As the motion was limited to a procedural flaw, the Court did not find an effective waiver.

The Court found one of defendant's motions, which argued plaintiff was barred from arbitrating his claims on a class basis, was not a waiver. Instead, the motion was a reaffirmation of its intent to arbitrate and merely protected a right defendant believed it possessed.

Lastly, defendant's attempt to remove to federal court did not waive the right to arbitrate because defendant argued in federal court that the court's jurisdiction was limited rather than lacking entirely.

2. Unconscionability.

The plaintiff contended the arbitration provision was (a) procedurally unconscionable because it was a contract of adhesion and (b) substantively unconscionable because it (i) required the arbitrator decide the "validity, enforceability and scope" of the provision, (ii) required the arbitrator to apply the rules of the provision if they were to conflict with the arbitrator's rules, (iii) required the arbitrator to enforce the provision as written, (iv) required the plaintiff to reimburse defendant if defendant overturns an award greater than $75,000, (v) only allowed limited discovery, and (vi) is enforceable only if the class action waiver clause is also enforceable.

Both procedural and substantive unconscionability must be present for a court to invalidate a contract provision as unconscionable. In making its determination on procedural unconscionability, the Court declined to analyze the bargaining power among the parties in order to determine whether the arbitration provision was a contract of adhesion because plaintiff had a "meaningful choice." Here, both the notice plaintiff received and the opt-out provision contained in the notice were clear, conspicuous, and, regarding the opt-out provision, convenient.

Although not necessary, the Court thought it was prudent to address plaintiff's substantive unconscionabilty arguments as well, finding that none of the provision's features were unconscionable individually or in their entirety.

This opinion is available in PDF.

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