IN THE

SUPREME COURT OF FLORIDA

CASE NO. SC10-19 JAMES PENDERGAST, On Certification from the Appellant/Movant, United States Court of Appeals For the Eleventh Circuit v. Case No. 09-10612 SPRINT SOLUTIONS, INC., and SPRINT SPECTRUM, L.P., Appellees/Respondents. ________________________________/

ANSWER BRIEF OF APPELLEES/RESPONDENTS SPRINT SOLUTIONS, INC. AND SPRINT SPECTRUM, L.P.

Thomas R. Julin (FL Bar No. 325376) Hunton & Williams LLP 1111 Brickell Avenue, Suite 2500 Miami, Florida 33131 Tel.: (305) 810-2516 Fax: (305) 810-2460 tjulin@hunton.com

David E. Mills (pro hac vice) Daniel D. Prichard (pro hac vice) Dow Lohnes PLLC 1200 New Hampshire Ave., NW Suite 800 Washington, D.C. 20036 Tel.: (202) 776-2000 Fax: (202) 776-2222 dmills@dowlohnes.com dprichard@dowlohnes.com

Counsel for Appellees/Respondents Sprint Solutions, Inc. and Sprint Spectrum, L.P.

May 11, 2010

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TABLE OF CONTENTS Page

TABLE OF AUTHORITIES .................................................................................. iv

STATEMENT OF THE CASE AND THE FACTS ................................................. 1

I. Procedural History ................................................................................. 1

II. Statement Of Relevant Facts ................................................................. 3

A. Pendergast Became A Sprint Customer And Agreed To Arbitrate Disputes On

An Individualized Basis. ............................................................. 3

B. Sprint Updated The Terms And Conditions, And Pendergast Accepted

The Revised Terms And Conditions. .......................................... 5

C. The Dispute Resolution Agreement. ........................................... 6

SUMMARY OF ARGUMENT ................................................................................. 7

ARGUMENT ...........................................................................................................12

I. Standard Of Review ............................................................................12

II. There Is No National Or Florida Public Policy Hostile To Traditional Bilateral Arbitration Or To Enforcement Of Class Arbitration Waivers ...................................................................12

III. This Court Should Reaffirm Its Existing Standard And Find That Pendergast Failed To Show Either Procedural Or Substantive Unconscionability Or Any Other Basis Under Florida Law To Invalidate His Individualized Arbitration Agreement ...........................................................................................15

A. This Court Should Continue To Require Parties Challenging Contracts To Demonstrate Both Procedural And

Substantive Unconscionability..................................................15

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TABLE OF CONTENTS (continued)

Page 1. Current Florida Law Requires Independent

Showings Of Procedural And Substantive Unconscionability ...........................................................16

2. The Independent Analysis Test Is

Consistent With Florida Law Favoring Enforcement of Contracts ...............................................19

3. The Court Should Reject the “Exculpatory

Clause” and “Sliding Scale” Tests for Unconscionability ...........................................................22

B. The Class Arbitration Waiver in Pendergast’s

Contract With Sprint Is Not Procedurally Unconscionable. ........................................................................28

1. Pendergast Cannot Establish Procedural Unconscionability Because He Cannot Establish That He Personally Lacked A Meaningful Choice .........................................................28

2. Pendergast Cannot Repudiate His

Acceptance Of The Contract In July 2005 By Implying That He Did Not Receive Prior Notice Of Its Terms .................................33

3. Pendergast’s Criticism Of The District

Court And His Sliding Scale Arguments Have No Merit ................................................................36

C. The Class Arbitration Waiver In Pendergast’s

Contract With Sprint Is Not Substantively Unconscionable. ........................................................................39

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TABLE OF CONTENTS (continued)

Page 1. The U.S. Supreme Court Decision In

Stolt-Nielson Demonstrates That Class Arbitration Waivers Cannot Be Substantively Unconscionable Per Se ............................40

2. Pendergast Is Wrong That Florida

Jurisprudence Has Found Class Waivers Substantively Unconscionable ........................................41

3. The Dispute Resolution Mechanisms

Available in Pendergast’s Arbitration Agreement Are Neither Outrageously Unfair Nor Conscience Shocking ...................................44

a. Pendergast Had A Variety Of Avenues

To Pursue His Claims Against Sprint .................46 b. Government Enforcement Is A

Compelling Avenue For Redress Of Customer Complaints ..........................................48

c. It Is Neither Outrageously Unfair Nor

Conscience Shocking That Rational Consumers Might Forego Private Class Actions ........................................................52

D. Pendergast Has Not Raised Any Other Basis To

Void The Class Arbitration Waiver Under Florida Law. ...........................................................................................55

CONCLUSION ........................................................................................................60

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TABLE OF AUTHORITIES Page

CASES

Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265 (1995) .......... 14, 41, 55

Ambrose v. Comcast Corp., No. 3:09-cv-182, 2010 WL 1270712 (E.D. Tenn. March 31, 2010) ................................................................... 43

Am. Exp. Co. v. Italian Colors Rest., No. 08-1473, --- S.Ct. ---, 2010 WL 1740528 (May 3, 2010) ............................................................ 16

Am. Online Inc. v. Pasieka, 870 So. 2d 170 (Fla. 1st DCA 2004) ................ 42

Anders v. Hometown Mortgage Servs, Inc., 346 F.3d 1024 (11th Cir. 2003) ........................................................................................ 56 AutoNation USA Corp. v. Leroy, 105 S.W.3d 190 (Tex. App. 2003) .......... 43 Beach Resort Hotel Corp. v. Wieder, 79 So. 2d 659 (Fla. 1955) ............ 20, 24

Belcher v. Kier, 558 So. 2d 1039 (Fla. 2d DCA 1990) ..................... 20, 28, 39

Bellsouth Mobility, LLC v. Christopher, 819 So. 2d 171 (Fla. 4th DCA 2002) ................................................................................. 42

Bhim v. Rent-A-Center, Inc., 655 F. Supp. 2d 1307 (S.D. Fla. 2009) .......... 37

Bland v. Health Care & Retirement Corp. of Am., 927 So. 2d 252 (Fla. 2d DCA 2006) ...................................................................... 18, 21, 39

Brasington v. EMC Corp., 855 So. 2d 1212 (Fla. 1st DCA 2003) ................ 18 Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217 (11th Cir. 2000) .......... 55 Brueggemann v. NCOA Select, Inc., No. 08-80606-CIV, 2009 WL 1873651 (S.D. Fla. June 30, 2009) .......................................... 43 Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440 (2006) ................ 56

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TABLE OF AUTHORITIES (continued)

Page CC-Aventura, Inc. v. The Weitz Co., LLC, No. 06-21598-CIV, 2009

WL 3326806 (S.D. Fla. Oct. 9, 2009) ...................................................... 37 Chiles v. United Faculty of Fla., 615 So. 2d 671 (Fla. 1993) ....................... 19

Cicle v. Chase Bank USA, 583 F.3d 549 (8th Cir. 2009) ............................. 43 Clerk v. First Bank of Del., No. 09-5121, 2010 WL 1253578 (E.D. Pa. Mar. 23, 2010) .......................................................................... 43 Coady v. Cross Country Bank, 729 N.W.2d 732 (Wis. Ct. App. 2007) ................................................................................ 43 Complete Interiors v. Behan, 558 So. 2d 48 (Fla. 5th DCA 1990) ............... 28 Credit Acceptance Corp. v. Davisson, 644 F. Supp. 2d 948

(N.D. Ohio 2009) ...................................................................................... 43 Cruz v. Cingular Wireless, LLC, No. 2:07-CV-00714, 2008 WL 4279690 (M.D. Fla. Sept. 15, 2008) .................................. 43, 57

Dale v. Comcast Corp., 498 F.3d 1216 (11th Cir. 2007) ........................ 42, 44 Discover Bank v. Super. Ct., 113 P.3d 1100 (Cal. 2005).............................. 49 Duvall v. Walton, 144 So. 318 (Fla. 1932) ............................................. 17. 19

Edwards v. Blockbuster, Inc., 400 F. Supp. 2d 1305 (E.D. Okla. 2005) ...... 43 Estate of Perez v. Life Care Ctrs. of Am., Inc., 23 So. 3d 741 (Fla. 5th DCA 2009) ................................................................................. 18 Feeney v. Dell, Inc., 908 N.E.2d 753 (Mass. 2009) ...................................... 57 Figueroa v. Sharper Image Corp., 517 F. Supp. 2d 1292

(S.D. Fla. 2007) ........................................................................................ 50

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TABLE OF AUTHORITIES

(continued) Page

Fiser v. Dell Computer Corp., 188 P.3d 1215 (N.M. 2008) .......................... 57 Fonte v. AT&T Wireless Servs., Inc., 903 So. 2d 1019 (Fla. 4th DCA 2005) ..........................................................................passim

Gainesville Healthcare Ctr., Inc. v. Weston, 857 So. 2d 278 (Fla. 1st DCA 2003) ..................................................................... 20, 30, 31 Gay v. CreditInform, 511 F.3d 369 (3d Cir. 2007) ....................................... 55

Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (1991) ...................... 59

Hayes v. County Bank, 811 N.Y.S.2d 741 (N.Y. App. Div. 2006) .............. 43 Henry v. Pizza Hut of Am., Inc., No. 07-cv-01128-Orl-DAB, 2007

WL 2827722 (M.D. Fla. Sept. 27, 2007) ................................................. 37 Hialeah Auto., LLC v. Basulto, 22 So. 3d 586 (Fla. 3d DCA 2009) ...... 16, 38 Holt v. O’Brien Imps., 862 So. 2d 89 (Fla. 2d DCA 2003) .......................... 59 Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002) ....................... 56

Hughes v. Alltel Corp., No. 4-03-CV-127-SPM, 2004 U.S.Dist. LEXIS 20705 (N.D. Fla. Mar. 31, 2004) ........................ 43

Hume v. United States, 132 U.S. 406, 10 S.Ct. 134 (1889) .......................... 40

Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159 (5th Cir. 2004) .......................................................................................... 49 In re Am. Express Merch.’s Litig., 554 F.3d 300 (2d Cir. 2009) .................. 15 In re Jamster Mktg. Litig., No. 05-cv-0819, 2008 WL 4858506

(S.D. Cal. Nov. 10, 2008) ......................................................................... 43

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TABLE OF AUTHORITIES (continued)

Page In re Managed Care Litig., No. 00-1334-MD, 2009 WL 855963 (S.D. Fla. Mar. 30, 2009).......................................................................... 25

In re NationsRent Rental Fee Litig., No. 06-60924-CIV, 2009 WL 636188 (S.D. Fla. Feb. 24, 2009) ............................................. 36

Jenkins v. First Am. Cash Advance of Ga., 400 F.3d 868 (11th Cir. 2008) ........................................................................................ 45

Johnson v. Sprint Solutions, Inc., No. 3:08-CV-00054, 2008 WL

2949253 (Jul. 29, 2008), aff’d, No. 08-1948, 2009 WL 4919363 (4th Cir. Dec. 18, 2009) ........................................................................ 1, 51

Johnson v. West Suburban Bank, 225 F.3d 366 (3d Cir. 2000) .................... 49 Kohl v. Bay Colony Club Condo, Inc., 398 So. 2d 865

(Fla. 4th DCA 1981) ..................................................................... 21, 28, 39

Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006) ............................... 51 Kucan v. Advance Am., 660 S.E.2d 98 (N.C. Ct. App. 2008) ...................... 51

La Torre v. BSF Retail & Commercial Operations, LLC, No. 08-

22046-CIV, 2008 WL 5156301 (S.D. Fla. Dec. 8, 2008) ........................ 43 Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, 541 So. 2d 1121 (Fla. 1989) ......................................................... 20, 28, 38

Metcalf v. Leedy, Wheeler & Co., 191 So. 690 (Fla. 1939) ................... 18, 20

Miele v. Prudential-Bache Secs., Inc., 656 So. 2d 470 (Fla. 1995) .............. 21

Mitsubishi Motors Corp. v. Sole Chrysler-Plymouth, Inc.,

473 U.S. 614 (1985) ................................................................................. 27 Mizell Love Stock Co. v. J.J McCaskill Co., 51 So. 547 (Fla. 1910) ........... 20

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TABLE OF AUTHORITIES (continued)

Page

Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) ..................................................................................... 14

Muhammad v. County Bank of Rehoboth Beach, 912 A.2d 88

(N.J. 2006) ................................................................................................ 51

Murphy v. Courtesy Ford, L.L.C., 944 So. 2d 1131 (Fla. 3d DCA 2006) .................................................................................. 16

Nat’l Fin. Servs., L.L.C. v. Mahan, 19 So. 3d 1134

(Fla. 3d DCA 2009) .................................................................................. 18 Orkin Exterminating Co. v. Petsch, 872 So. 2d 259

(Fla. 2d DCA 2004) ............................................................................ 30, 37

Palm Beach Motors Ltd. v. Jeffries, 885 So. 2d 990 (Fla. 4th DCA 2004) ................................................................................. 37

Pasteur Health Plan, Inc. v. Salazar, 658 So. 2d 543

(Fla. 3d DCA 1995) .................................................................................. 23

Peacock Hotel, Inc. v. Shipman, 138 So. 44 (Fla. 1931) .......................... 7, 16

Powertel v. Bexley, 743 So. 2d 570 (Fla. 1st DCA 1999) .....................passim

Premier Real Estate Holdings, LLC v. Butch, 24 So. 3d 708 (Fla. 4th DCA 2009) ................................................................................. 19

Preston v. Ferrer, 552 U.S. 346 (2008) .......................................................... 26

Rando v. Gov’t Employees Ins. Co., 35 Fla. L. Weekly 5201,

2010 WL 1372697 (Fla. Apr. 8, 2010) ..................................................... 12

Randolph v. Green Tree Fin. Corp.-Ala.., 244 F.3d 814 (11th Cir. 2001) ........................................................................................ 57

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TABLE OF AUTHORITIES (continued)

Page Reeves v. Ace Cash Express, Inc., 937 So. 2d 1136

(Fla. 2d DCA 2006) .................................................................................. 42

Regency Group, Inc. v. McDaniels, 647 So. 2d 192 (Fla. 1st DCA 1994) ................................................................................. 22

Reuter v. Davis, No. 502001CA001164XXXXMB, 2006 WL 3743016 (Fla. 15th Cir. Dec. 12, 2006) ....................... 36, 42, 57 Rivera v. AT&T Corp., 420 F. Supp. 2d 1312 (S.D. Fla. 2006) ............. 43, 48

Rollins, Inc. v. Butland, 951 So. 2d 860 (Fla. 2d DCA 2006) ...................... 49

Rollins, Inc. v. Garrett, 176 Fed. Appx. 968 (11th Cir. 2006) ...................... 42 Rollins v. Heller, 454 So. 2d 580 (Fla. 3d DCA 1984) ................................. 23

Romano v. Manor Care, Inc., 861 So. 2d 59 (Fla. 4th DCA 2003) ........ 28, 38

Sanders v. Comcast Cable Holdings, LLC, No. 3:07-cv-918-J-334TS,

2008 WL 150479 (M.D. Fla. Jan 14, 2008) ............................................. 44

Schnuerle v. Insight Commc’s Co., No. 2006-CA-002121-MR, 2008 WL 4367840 (Ky. Ct. App. Sept. 26, 2008) ................................... 44

Scott v. Cingular Wireless, 161 P.3d 1000 (Wash. 2007) ............................. 51 S.D.S. Autos., Inc. v. Chrzanowski, 976 So. 2d 600

(Fla. 1st DCA 2007) ........................................................................... 57, 58

Spann v. Am. Express Travel Related Servs. Co., 224 S.W.3d 698 (Tenn. Ct. App. 2006) ............................................................................... 43 State v. Ives, 167 So. 394 (Fla. 1936) ........................................................... 19

State v. Lehman, 131 So. 533 (Fla. 1930) ..................................................... 19

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TABLE OF AUTHORITIES (continued)

Page Steinhardt v. Rudolph, 422 So. 2d 884 (Fla. 3d DCA 1982) ........................ 16

Stolt-Nielsen S.A. v. AnimalFeeds International Corp., --- S.Ct. ---

2010 WL 1655826 (Apr. 27, 2010) ...................................................passim

Strand v. U.S. Bank Nat’l Ass’n ND, 693 N.W.2d 918 (N.D. 2005) ........... 43 Szymkowicz v. DirecTV, Inc., No. Civ. A. 07-0581PLF,

2007 WL 1424652 (D.D.C. May 9, 2007) ............................................... 43 Teague v. Lane, 489 U.S. 288 (1989) ............................................................ 13 Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. Ct. 2006) .............. 55 Torkiver v. Sprint Solutions, Inc., No. 08-CV-852

(E.D.N.Y. Apr. 22, 2009) ........................................................................... 1

Tsadilas v. Providian Nat’l Bank, 13 A.D.3d 190 (N.Y. App. Div. 2004) .............................................................................. 49

Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) ................................. 53

United States v. Carver, 260 U.S. 482 (1923) ............................................... 13 VoiceStream Wireless Corp. v. U.S. Commc’ns, Inc., 912 So. 2d 34 (Fla. 4th DCA 2005) ................................................... 19, 31

Volt Info. Scis., Inc. v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468 (1989) ........................................................... 14 Walther v. Sovereign Bank, 872 A.2d 735 (Md. 2005) ................................ 43

CONSTITUTIONS, STATUTES, RULES, AND REGULATIONS

Ala. Code § 8-9-10 ........................................................................................ 54

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TABLE OF AUTHORITIES (continued)

Page

Fla. Const. Art. V, § 3(b)(6) .......................................................................... 12 Fla. R. App. P. 9.150 ..................................................................................... 12 Fl. R. Civ. P. 1.380 ........................................................................................ 45 Fla. Stat. § 25.031 .......................................................................................... 12

Fla. Stat. § 501.203 .................................................................................. 50, 56

Fla. Stat. § 501.206 .................................................................................. 48, 50

Fla. Stat. § 501.207 ........................................................................................ 50 Fla. Stat. § 501.2075 ...................................................................................... 50

Fla. Stat. § 501.2101 ...................................................................................... 50

Fla. Stat. § 501.2105 ................................................................................ 45, 58

Fla. Stat. § 501.211 .................................................................................. 58, 59 Fla. Stat. § 501.976 ........................................................................................ 57 Ga. Code. Ann. § 10-1-399 ............................................................................ 54

La. Rev. Stat. Ann. § 51:1409 ....................................................................... 54 Miss. Code Ann. § 75-24-15 ......................................................................... 54

9 U.S.C. § 2 ................................................................................................. 26

9 U.S.C. § 5 ................................................................................................. 55

42 C.F.R. § 52.31 ........................................................................................... 32

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TABLE OF AUTHORITIES (continued)

Page 47 U.S.C. § 201 .............................................................................................. 47

47 U.S.C. § 207 .............................................................................................. 48

47 U.S.C. § 208 .............................................................................................. 47

OTHER AUTHORITIES

1 Corbin on Contracts § 1.4 ........................................................................... 25 Christopher R. Leslie, The Significance of Silence: Collective Action

Problems and Class Action Settlements, 59 Florida L. Rev. 71 .............. 54

David S. Clancy & Matthew M.K. Stein, An Uninvited Guest: Class Arbitration and the Federal Arbitration Act’s Legislative History, 63 BUS. LAW. 551 .................................................................................. 27

David J. Kahne, Curbing the Abuser, Not the Abuse: A Call for

Greater Professional Accountability and Stricter Ethical Guidelines for Class Action Lawyers, 19 Georgetown J. Legal Ethics 741 ................................................................................................. 54

Fla. Jur. 2d, Contracts §§ 11, 21, 76, 145 ...................................................... 22

John H. Beisner et al., Class Action "Cops": Public Servants or

Private Entrepreneurs, 57 Stanford L. Rev. 1441 ........................ 50, 52, 53 Lawrence J. McQuillan & Hovannes Abramyan, The Tort Tax, Wall

St. J., March 27, 2007 ............................................................................... 53

Restatement (Second) of Contracts § 211 ..................................................... 25 Russell Kamerman, Securities Class Action Abuse: Protecting Small

Plaintiffs’ Big Money, 29 Cardozo L.Rev. 853, 862 ......................... 51, 54 S. Rep. No. 109-14, at 5 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 5 ......... 52

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STATEMENT OF THE CASE AND THE FACTS

I. Procedural History

On February 29, 2008, Pendergast filed this putative class action for

allegedly improper wireless telephone roaming charges based on his contract with

Sprint Solutions, Inc. (“Sprint”). This is the last of three such actions brought

against Sprint in rapid succession in early 2008. Pendergast’s case is substantively

identical to one filed in the Western District of North Carolina that was dismissed

on the merits (affirmed by the Fourth Circuit), because Sprint’s contract did not

contain the alleged misrepresentation regarding roaming charges.1

On January 13, 2009, following briefing and a hearing, United States

District Judge Patricia Seitz granted Sprint’s motion to compel arbitration,

rejecting Pendergast’s sole argument – that the class waiver in his arbitration

agreement with Sprint was unconscionable – because the agreement presented

several avenues for resolution of claims against Sprint (e.g., informal dispute

resolution, arbitration, small claims court, and claims with federal or state

1 Johnson v. Sprint Solutions, Inc., No. 3:08-CV-00054, 2008 WL 2949253, at *2 (Jul. 29, 2008), aff’d, No. 08-1948, 2009 WL 4919363 (4th Cir. Dec. 18, 2009) (“Johnson’s claims all rest on a theory wholly refuted by the plain terms of the Contract and fail as a matter of law.”). The other action was dismissed after the original plaintiff resolved his claims with Sprint (without attorneys) and the court found that a newly added plaintiff (added under questionable circumstances) had never even used Sprint’s services and therefore had suffered no injury. See Dismissal Order, Torkiver v. Sprint Solutions, Inc., No. 08-CV-852 (E.D.N.Y. Apr. 22, 2009).

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authorities), and Pendergast had executed the contract with notice and a

meaningful choice. Rather than stay the case pending arbitration, Pendergast asked

the court to issue a dismissal, Doc. 60,2

2 “Doc.” references are to docket entries made through the Southern District of Florida’s PACER system.

so he could immediately appeal to the

Eleventh Circuit, which he did on January 30, 2009.

On January 4, 2010, following briefing and argument, the Eleventh Circuit

issued an opinion containing a detailed statement of the factual record. The

opinion (“Cert. Op.”) analyzed and certified the following four questions to this

Court:

(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?

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II. Statement Of Relevant Facts3

The two-page Advantage Agreement repeatedly gave Pendergast prominent

notice that it incorporated Sprint’s then-current Terms and Conditions of Service

(“Ts&Cs”) and that those Ts&Cs included a mandatory arbitration provision. Cert.

Op. at 12-13.

A. Pendergast Became A Sprint Customer And Agreed To Arbitrate Disputes On An Individualized Basis.

Pendergast first became a Sprint customer when he agreed to a two-year

contract under Sprint’s Free and Clear Plan on or about August 2, 2001. Cert. Op.

at 3; Doc. 33-6, ¶ 7. On July 2, 2005, nearly two years after his initial commitment

had ended (and Pendergast was free to terminate his Sprint service entirely without

penalty), Pendergast expanded his services with a second phone line by entering

into a two-year Advantage Agreement with Sprint. Cert. Op. at 8; Doc. 33-6, ¶ 15.

At the same time, Pendergast purchased an additional wireless phone that was

subsidized by Sprint. Cert. Op. at 8; Pendergast Opening Brief (“Br.”) at 6-7.

4

3 The Eleventh Circuit’s recitation of facts is accurate. However, because Pendergast’s opening brief contains inaccurate, irrelevant and argumentative statements of fact, Sprint offers a short summary.

The Advantage Agreement also provided that Pendergast could

cancel his service without an early termination fee and return his phone for a full

refund within 14 days. Cert. Op. at 13; Doc. 33-9 at 3. Pendergast elected to keep

4 See also Doc. 33-9 at 2 (“MANDATORY ARBITRATION” provision), 3 (“THIS CONTRACT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED . . . .”).

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his phone and continued to purchase and receive wireless phone service from

Sprint for at least two more years. Cert. Op. at 25-26.

When he entered into the Advantage Agreement, Pendergast specifically

acknowledged that he had both read and agreed to be bound by Sprint’s most

recent Ts&Cs.5

YOU AND SPRINT FURTHER AGREE THAT NEITHER SPRINT NOR YOU WILL JOIN ANY CLAIM WITH THE CLAIM OF ANY OTHER PERSON OR ENTITY IN A LAWSUIT, ARBITRATION OR OTHER PROCEEDING; THAT NO CLAIM EITHER SPRINT OR YOU HAS AGAINST THE OTHER SHALL BE RESOLVED ON A CLASS-WIDE BASIS; AND THAT NEITHER SPRINT NOR

Cert. Op. at 12-13. The then-current Ts&Cs had an effective date

of June 30, 2004 (the “6/30/04 Ts&Cs”), and Sprint provided Pendergast with a

physical copy of those Ts&Cs with his new phone. Cert. Op. at 8; Docs. 33-14,

¶ 9; 33-6, ¶ 17; 33-3, ¶ 11. The first paragraph of the 6/30/04 Ts&Cs emphasized

that they set forth “the terms on which we [Sprint] agree to provide and you agree

to accept any service or product we make available to you, including your wireless

services. . . .” Cert. Op. at 9; Doc. 33-17 at 2 (emphasis added).

The 6/30/04 Ts&Cs also set forth the full mandatory arbitration provision

referenced in the Advantage Agreement, entitled “MANDATORY

ARBITRATION OF DISPUTES,” which stated as follows:

5 Doc. 33-6, ¶¶ 16-17; Doc. 33-9 at 2 (“Your agreement includes . . . the most recent Terms and Conditions of Service for PCS (‘Ts&Cs’) . . . .”), 3 (“By signing below you . . . agree that you have read and agreed to all terms of this Agreement, including . . . the most recent Ts&Cs . . . .”).

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YOU WILL ASSERT A CLAIM IN A REPRESENTATIVE CAPACITY ON BEHALF OF ANYONE ELSE.

Cert. Op. at 10-11; Doc. 33-17 at 8 (capitalization and bolding in original).

B. Sprint Updated The Terms And Conditions, And Pendergast Accepted The Revised Terms And Conditions.

The 6/30/04 Ts&Cs contained a provision permitting Sprint to update the

Ts&Cs. Cert. Op. at 9; Doc. 33-17 at 2. That provision gave Pendergast the

unilateral right to terminate his services within 30 days of notice of an update if he

did not accept any material change made to the Ts&Cs.

On December 2, 2007, Sprint issued Pendergast an invoice notifying him

that the Ts&Cs would be updated effective January 1, 2008:

Important Notice: Changes to Terms and Conditions The Terms & Conditions for Sprint PCS and Nextel services have been updated. These new terms are effective January 1, 2008, and are available at sprint.com or upon request. Please carefully review these terms as they apply to any future use of our services.

Cert. Op. at 21; Docs. 33-6, ¶¶ 31-33; 33-13 at 6 (bold in original). The revised

Ts&Cs (“1/1/08 Ts&Cs”) were available on Sprint’s website prior to their effective

date. Doc. 33-14, ¶ 13. Following receipt of the notice regarding the updated

Ts&Cs, Pendergast continued to use his service for more than 30 days. Cert. Op.

21-22; Doc. 33-6, ¶ 33.

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C. The Dispute Resolution Agreement.

The 1/1/08 Ts&Cs include a section entitled “DISPUTE RESOLUTION,”

which governs the present action (the “Dispute Resolution” provisions). Cert. Op.

at 24-25; Doc. 33-19 at 22-24 (bold in original). The Dispute Resolution

provisions were prominently set forth in a box that separated them from rest of the

Ts&Cs and provided Pendergast with a variety of dispute resolution mechanisms,

including informal dispute resolution, individualized arbitration, small claims

court, and government claims. Cert. Op. at 42, 47-48; Doc. 33-19 at 22-24.

The Dispute Resolution provisions explained in plain words the parties’

mutual commitment first to attempt to address disputes through informal dispute

resolution and then, if that process failed, the option to arbitrate their disputes on

an individualized basis rather than bring them in court. Cert. Op. at 24-25; Doc.

33-19 at 22-24. Under the 1/1/08 Ts&Cs, an arbitrator “can award the same

damages and relief [as a court], including any attorney’s fees authorized by law

. . . .” Cert. Op. at 24; Doc. 33-19 at 22.

The Dispute Resolution provisions also allowed the parties to bring actions

in small claims court and specifically acknowledged Pendergast’s right to bring his

claims to qualified state or federal government agencies:

Exceptions To Our Agreement To Arbitrate Disputes

Either of us may bring qualifying claims in small claims court. In addition, this arbitration provision does not prevent you from filing

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your dispute with any federal, state or local government agency that can, if the law allows, seek relief against us on your behalf.

Cert. Op. at 25; Doc. 33-19 at 24 (bold in original).

Finally, the Dispute Resolution provisions prominently provided that

Pendergast and Sprint agreed not to pursue classwide arbitration:

We each agree not to pursue arbitration on a classwide basis. We each agree that any arbitration will be solely between you and us (not brought on behalf of or together with another individual’s claim). If for any reason any court or arbitrator holds that this restriction is unconscionable or unenforceable, then our agreement to arbitrate doesn’t apply and the dispute must be brought in court.

Cert. Op. at 24; Doc. 33-19 at 24 (italics in original).

SUMMARY OF ARGUMENT

For nearly eighty years, since this Court’s decision in Peacock Hotel, Inc. v.

Shipman, 138 So. 44 (Fla. 1931), litigants challenging contracts as unconscionable

have had the burden to prove both procedural and substantive unconscionability.

The vast majority of Florida District Courts of Appeal have followed this standard,

requiring both procedural and substantive unconscionability. And while a few

courts have strayed into uncharted territory discussing sliding scales and balancing

tests, most of these courts still have required both elements and concluded their

analyses if they found either one lacking. See, e.g., Fonte v. AT&T Wireless

Servs., Inc., 903 So. 2d 1019 (Fla. 4th DCA 2005).

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While clarification may be useful, there is no reason to alter the law of

unconscionability in Florida, certainly not in the radical and unprecedented manner

Pendergast proposes. Long-standing precedent and public policy in this State

favor the enforcement of contracts according to their terms. Avoiding contractual

obligations is and should be difficult, and the high threshold for demonstrating the

affirmative defense of unconscionability should remain intact. This applies with

equal force to standard consumer contracts, on which many businesses and their

customers must rely. Accordingly, on the first question, the Court should clarify

that both procedural and substantive unconscionability are required and, if a court

finds one lacking, the court may conclude its analysis.

Pendergast proposes a new “exculpatory clause” test, which would borrow a

concept from a separate public-policy-related contract doctrine and infuse it into

the unconscionability analysis. He also proposes an alternative sliding scale test,

which would presume procedural unconscionability whenever there is a standard

form contract, and plaintiffs would be required to show only substantive

unconscionability. He then advocates for a rule that all class waivers in small-

claim cases are exculpatory and substantively unconscionable on the theory that

private class actions are the only viable avenue for obtaining relief in such cases.

The Court should reject Pendergast’s proposals. The law of

unconscionability should retain its integrity as a separate affirmative defense

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distinct from other public policy doctrines. Florida already has public policy

doctrines addressing exculpatory clauses as well as clauses that would defeat the

remedial purposes of a statute. Principles of contract formation also protect parties

who do not truly assent to contract terms. These doctrines provide protection

under specific circumstances (not present here) and should not be grafted onto the

unconscionability analysis, which would foster more confusion, not less.

The Court also should reject a sliding scale or balancing test, which would

lower and dilute the threshold showings required for each element of

unconscionability and lay a foundation for inconsistent and unpredictable

jurisprudence in Florida. It would make bad policy, essentially eliminating

procedural unconscionability and allowing courts to rewrite or void contracts even

when parties had full knowledge of their terms and a meaningful choice of whether

to enter into them. There is no reason to stir this hornet’s nest.

On the second question, the Court should find that the class waiver in

Pendergast’s arbitration agreement is not procedurally unconscionable under

Florida law. The undisputed evidence is that in July 2005 Pendergast received a

copy of Sprint’s terms and conditions containing the class arbitration waiver, read

the terms and conditions, and then accepted them by signing a contract that

incorporated them. He then had an additional two weeks to further review the

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terms and conditions and to reject them for any reason or for no reason. Instead,

he continued to purchase and receive Sprint’s services for at least two years.

The facts and circumstances here undermine Pendergast’s argument that he

lacked meaningful choice. Pendergast says he was “stuck” with a class arbitration

waiver, but that is not true. He could have walked away freely in July 2005

because he had already completed his initial two-year service contract, and even

though an earlier set of terms and conditions included a class waiver he could have

walked away from that, too, even under his own theories.

In any event, Pendergast’s theories do not negate the fact that he made an

informed choice in July 2005 to sign up for service notwithstanding the class

waiver notices – which the district court and Eleventh Circuit found were

prominent, repeated and easy to understand – and notwithstanding his wireless

service options that did not require class waivers. Florida law does not and should

not presume that all form consumer contracts are procedurally unconscionable.

On the third question, substantive unconscionability in Florida requires a

party to show that the contract term is so outrageously unfair as to shock the

judicial conscience. Pendergast’s agreement to arbitrate on an individual basis

simply does not meet that standard. Both Florida and federal policy favor

arbitration as a cost- and time-efficient, consumer-friendly form of dispute

resolution. In fact, as the U.S. Supreme Court recently made clear in Stolt-Nielsen

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S.A. v. AnimalFeeds Int’l Corp., there are perfectly rational reasons for parties

(including consumers) to elect to arbitrate on a bilateral and not on a classwide

basis, and those choices must be honored. Indeed, when Congress established

federal policy favoring arbitration under the Federal Arbitration Act, individual

arbitration was the norm. Accordingly, class waivers cannot be considered

“conscience shocking” per se.

In addition, Pendergast’s particular contract with Sprint provides several

avenues to resolve claims, including informal dispute resolution, small claims

court, claims with state and federal agencies, and participating in government

actions. Pendergast scoffs at these alternatives, but he never attempted to use them

before filing this class action. Nor is there any basis for his doomsday scenario,

because class waivers would not exculpate Sprint from alleged wrongdoing. One

procedural avenue is unavailable, but consumers and government may still pursue

claims. Indeed, the Florida Attorney General does so routinely and effectively –

including on a classwide basis, where merited. No service provider would feel

immune from liability merely because private class actions are unavailable.

Furthermore, contrary to Pendergast’s claim, class waivers are not

inconsistent with the remedial purposes of the Florida Deceptive and Unfair Trade

Practices Act (“FDUTPA”) or with the concept of consumer protection. In fact, a

number of states go so far as to bar class actions for violations of their unfair and

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deceptive trade practices statutes. On these facts, the Court should not find that a

consumer contract that waives the class procedure shocks the judicial conscience.

Finally, on the fourth question, there is no other basis on which to void the

individualized arbitration agreement. The class waiver is neither exculpatory nor

contrary to the remedial purposes of FDUTPA. Bilateral arbitration, especially

when coupled with the alternatives available under Pendergast’s contract with

Sprint, is consistent with decades of practice, with the FAA, and with FDUTPA.

ARGUMENT

I.

Certified questions must present “questions of law” that are “determinative

of the cause” for which “there is no controlling precedent” from this Court.

Standard Of Review.

See

Art. V, § 3(b)(6), Fla. Const.; § 25.031, Fla. Stat.; Fla. R. App. P. 9.150(a). While

free to consult the underlying record, Fla. R. App. P. 9.150(c), the Court generally

relies on the facts set forth in the certified opinion.6

II. There Is No National Or Florida Public Policy Hostile To Traditional

The fundamental premise of Pendergast’s case is that class action waivers in

consumer cases are presumptively unconscionable because they are exculpatory.

Even before addressing the certified questions, Pendergast argues there is a so-

Bilateral Arbitration Or To Enforcement Of Class Arbitration Waivers.

6 Rando v. Gov’t Employees Ins. Co., 35 Fla. L. Weekly 5201, 2010 WL 1372697, at *1 (Fla. Apr. 8, 2010) (facts fully set forth in Eleventh Circuit opinion).

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called national trend and claims that the U.S. Supreme Court disfavors class action

waivers. These arguments are incorrect.

Pendergast relies on the decision in Powertel, Inc. v. Bexley, 743 So. 2d 570

(Fla. 1st DCA 1999), for the proposition that Florida courts are trending toward

rejecting class waivers. However, the Eleventh Circuit rejected Pendergast’s

argument that Powertel is analogous to this case, finding Powertel’s holding was

limited to its own specific facts. In addition, Pendergast ignores the many recent

Florida cases, cases decided under Florida law, and cases from other states that

have upheld class waivers. Those cases are addressed in Section III., C., 2., infra.

In fact, virtually all the cases to address the issue agree that whether to enforce a

class waiver is a case-by-case decision, and any perceived trend within or among

selected states offers no relevant guidance here.

In addition, Pendergast is wrong that the U.S. Supreme Court has indicated

hostility toward class arbitration waivers by denying certiorari in arbitration cases

in recent years.7

7 “[T]he ‘denial of a writ of certiorari imports no expression of opinion upon the merits of the case.’” Teague v. Lane, 489 U.S. 288, 296 (1989) (quoting United States v. Carver, 260 U.S. 482, 490 (1923)).

Br. at 20-21. To the contrary, the U.S. Supreme Court recently

issued a ruling that makes clear that class arbitration waivers are not and cannot be

disfavored. See Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., No. 08-1198, ---

S.Ct. ---, 2010 WL 1655826, at *12 (Apr. 27, 2010).

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Stolt-Nielsen, like this case, involved an arbitration agreement governed by

the Federal Arbitration Act (“FAA”). The FAA embodies the “liberal federal

policy favoring arbitration agreements.” Moses H. Cone Mem’l Hosp. v. Mercury

Constr. Corp., 460 U.S. 1, 24 (1983). “[T]he central or ‘primary’ purpose of the

FAA is to ensure that ‘private agreements to arbitrate are enforced according to

their terms.’” Stolt-Nielsen, 2010 WL 1655826, at *12 (citing Volt Info. Scis., Inc.

v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)).

Congress had consumers in mind in enacting the FAA, recognizing the benefits of

traditional arbitration to consumers. Allied-Bruce Terminix Cos. v. Dobson, 513

U.S. 265, 280 (1995).

Stolt-Nielsen addressed whether class arbitration could be imposed when an

agreement was silent on the issue. As the U.S. Supreme Court explained, it is

axiomatic under the FAA that “parties may specify with whom they choose to

arbitrate their disputes,” and thus “a party may not be compelled under the FAA to

submit to class arbitration unless there is a contractual basis for concluding that the

party agreed to do so.” 2010 WL 1655826, at *12, *13 (emphasis in original).

The Court also found that while parties to bilateral arbitration “realize the

benefits of private dispute resolution: lower costs, greater efficiency and speed,”

“the relative benefits of class-action arbitration are much less assured.” Stolt-

Nielsen, 2010 WL 1655826, at *13. The Court deemed these differences between

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“bilateral” and “class-action” arbitration “fundamental” and ruled that, absent a

contractual basis to the contrary, the law presumes bilateral arbitration. Id. at *13.

Thus, it is plain from Stolt-Nielsen that the U.S. Supreme Court does not

disfavor class arbitration waivers;8 in fact, it recognizes the value of bilateral – as

opposed to class – arbitration, which it views as favorable to consumers.

III. This Court Should Reaffirm Its Existing Standard And Find That Pendergast Failed To Show Either Procedural Or Substantive Unconscionability Or Any Other Basis Under Florida Law To

In its opinion, the Eleventh Circuit “confirm[ed] the district court’s

interpretation of Florida law as requiring a showing of both procedural and

substantive unconscionability.” Cert. Op. at 30-31 (emphasis in original). After

examining precedent from each DCA, the Eleventh Circuit found that they

“consistently require a showing of both procedural and substantive

unconscionability.” Cert. Op. at 31 (citing case law from each DCA). The

Eleventh Circuit also observed that some of Florida’s DCAs “do not use . . . a

balancing or sliding scale approach and assess procedural and substantive

Invalidate His Individualized Arbitration Agreement.

A. This Court Should Continue To Require Parties Challenging Contracts To Demonstrate Both Procedural And Substantive Unconscionability.

8 The U.S. Supreme Court also recently summarily vacated the decision in In re American Express Merchants’ Litigation, 554 F.3d 300 (2d Cir. 2009), which had struck a class waiver on public policy grounds, and instructed the Second Circuit to

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unconscionability independently,” and that they “conclud[e] that if one part of the

unconscionability test is not established, the other part need not be examined at

all.” Cert. Op. at 32-33. The Eleventh Circuit referred to this approach as

“independent analysis.” Cert. Op. at 34.

The Eleventh Circuit nonetheless perceived “some tension in Florida law

regarding the analytical framework courts should use in evaluating both procedural

and substantive unconscionability.” Cert. Op. at 31. The Eleventh Circuit

observed that “[s]ome Florida courts . . . use a balancing or sliding scale

approach,” specifically referencing Steinhardt v. Rudolph, 422 So. 2d 884, 889

(Fla. 3d DCA 1982)9

Nearly eighty years ago, this Court recognized the equitable doctrine now

known as Florida’s law of unconscionability. In Peacock Hotel, Inc. v. Shipman,

138 So. 44 (Fla. 1931), a widow claimed she and her minor son had been wrongly

induced to sign a contract, and she sought to rescind it as unconscionable. 138 So.

and case law from the Fourth DCA. Cert. Op. at 32.

Accordingly, it certified the question to this Court.

1. Current Florida Law Requires Independent Showings Of Procedural And Substantive Unconscionability.

reconsider its judgment in light of Stolt-Nielsen. Am. Express Co. v. Italian Colors Restaur., No. 08-1473, --- S.Ct. ---, 2010 WL 1740528 (May 3, 2010). 9 Steinhardt is no longer good law. See Hialeah Auto., LLC v. Basulto, 22 So. 3d 586, 590 (Fla. 3d DCA 2009) (noting prior rejection of Steinhardt in Murphy v. Courtesy Ford, L.L.C., 944 So. 2d 1131, 1134 (Fla. 3d DCA 2006)).

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at 45. The Court ruled that a party seeking to void a contract based on

unconscionability bears the burden of demonstrating both: (1) that the party

seeking to enforce the contract had “overreached the other,” and (2) that the

overreaching party had gained “an unjust and undeserved advantage.” Id. at 46.

The Court explained the rationale and limitations of the doctrine:

It is not the function of courts to make contracts for parties, or to relieve them from the effects of bad bargains. But where the simplicity and credulity of people are taken advantage of by the shrewdness, overreaching and misrepresentation of those with whom they are dealing, and they are thereby induced to do unwittingly something the effect of which they do not intend, foresee, or comprehend, and which, if permitted to culminate, would be shocking to equity and good conscience, we think a court of equity may with propriety interpose.

Id. (citation omitted). The Court refused to set aside the contract because the

parties challenging it could not establish unconscionability.

[I]n the present case it was neither alleged nor proven that there was any overreaching on the part of the appellees, or that they gained an unjust or undeserved advantage which it would be inequitable or unrighteous to permit them to obtain. On the contrary, it appears that both Mrs. Peacock and her son were well informed, or in a position to be well informed, of every detail of the transaction that they were entering into and of its probable consequences.

Id. (emphasis added).

Subsequent cases in this Court further settled the doctrine in Florida. In

Duvall v. Walton, the Court again rejected an unconscionability challenge, finding

that neither essential element was present. 144 So. 318, 320 (Fla. 1932) (“Here it

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is not shown that Stanford overreached the appellants or gained an unjust or

undeserved advantage which would be inequitable or unjust to enforce.”). And in

Metcalf v. Leedy, Wheeler & Co., 191 So. 690, 692 (Fla. 1939), the Court rejected

a claim of unconscionability, explaining that “[t]he rule laid down in the Peacock

case, supra, is to protect innocent persons from being duped and misled by the

skill, cleverness, and artifices of those who are adept in the matter of deceiving

their fellow men.”

The Eleventh Circuit noted that many DCAs end their analyses if they find

either required element of unconscionability lacking, Cert. Op. at 33, which seems

perfectly logical. In fact, all the DCAs follow this approach, ending their analyses

if either element is lacking. As the Eleventh Circuit observed, cases from the

Second and Third DCAs reject the sliding scale approach and view each element

independently.10 Similarly, recent cases from the First and Fifth DCAs do not

follow the sliding scale approach and conclude their analyses when one component

is lacking.11

10 See, e.g., Bland v. Health Care & Retirement Corp. of Am., 927 So. 2d 252, 257 (Fla. 2d DCA 2006) (“This court, however, eschews the ‘sliding scale’ approach. Rather we assess procedural and substantive unconscionability independently.”); Nat’l Fin. Servs., L.L.C. v. Mahan, 19 So. 3d 1134, 1136-37 (Fla. 3d DCA 2009). 11 Brasington v. EMC Corp., 855 So. 2d 1212, 1218 (Fla. 1st DCA 2003) (rejecting unconscionability because of lack of procedural unconscionability); Estate of Perez v. Life Care Centers of Am., Inc., 23 So. 3d 741, 742 (Fla. 5th DCA 2009) (rejecting unconscionability because of lack of substantive unconscionability).

Even in the Fourth DCA, where some cases have referenced the

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sliding scale test, courts recognize they need not consider substantive

unconscionability if they determine that procedural unconscionability is lacking.12

In Florida, “[f]reedom of contract is the general rule; restraint is the

exception.” State v. Ives, 167 So. 394, 399 (Fla. 1936). Florida courts are not

concerned with “the wisdom or folly of contracts.” Duvall,

There is no reason to alter the law on these points. This Court should

reaffirm that a party asserting the affirmative defense of unconscionability has the

burden to show both procedural and substantive unconscionability and that a court

may terminate its analysis if either element is lacking.

2. The Independent Analysis Test Is Consistent With Florida Law Favoring Enforcement of Contracts.

The existing independent analysis test is consistent with the State’s well-

established law and policy honoring contracts and requiring an exceptional

showing to disturb private agreements. As this Court has held, the right to contract

is “one of the most sacrosanct rights guaranteed by our fundamental law.” Chiles

v. United Faculty of Fla., 615 So. 2d 671, 673 (Fla. 1993); see State v. Lehman,

131 So. 533 (Fla. 1930) (same).

144 So. at 319.

12 See Premier Real Estate Holdings, LLC v. Butch, 24 So. 3d 708, 711-12 (Fla. 4th DCA 2009) (“As Seller has not demonstrated that the arbitration provision is procedurally unconscionable, this court need not decide whether the provision is substantively unconscionable.”); Fonte v. AT&T Wireless Servs., Inc., 903 So. 2d at 1025 (same); see also VoiceStream Wireless Corp. v. U.S. Commc’ns, Inc., 912

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It is well settled that courts may not rewrite a contract or interfere with the freedom of contract or substitute their judgment for that of the parties thereto in order to relieve one of the parties from the apparent hardship of an improvident bargain.

Beach Resort Hotel Corp. v. Wieder, 79 So. 2d 659, 663 (Fla. 1955).13

With respect to procedural unconscionability, this Court has recognized that

a party challenging a contract must demonstrate an “absence of meaningful

choice.” Lanca Homeowners, Inc. v. Lantana Cascade of Palm Beach, 541 So. 2d

1121, 1124 (Fla. 1989). Indeed, the original rationale for the unconscionability

doctrine was to protect those who have been misled. See Metcalf, 191 So. at 692

Accordingly, Florida courts recognize that the unconscionability doctrine

must be used “with great caution.” Gainesville Healthcare Center, Inc. v. Weston,

857 So. 2d 278, 284 (Fla. 1st DCA 2003). The doctrine cannot be used to void

contractual obligations simply because they are perceived as “unreasonable” or

even “onerous.” Id. Nor does it authorize courts to substitute their own sense of

what is “reasonable” for the agreed terms of a contract. Belcher v. Kier, 558 So.

2d 1039 (Fla. 2d DCA 1990).

So. 2d 34, 40 (Fla. 4th DCA 2005) (recognizing that “[h]aving concluded that there is no procedural unconscionability, . . . our analysis could end there”). 13 Rather, “[p]ersons may make whatever contracts they please so long as no fraud or deception is practiced, and no law infringed.” Mizell Love Stock Co. v. J.J McCaskill Co., 51 So. 547, 328 (Fla. 1910).

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(unconscionability doctrine “is to protect innocent persons from being duped and

misled by the skill, cleverness, and artifices of those who are adept in [deceit]”).

Substantive unconscionability requires that the terms be so “outrageously

unfair” as to “shock the judicial conscience.” Bland v. Health Care & Retirement

Corp. of Am., 927 So. 2d 252, 256 (Fla. 2d DCA 2006); Kohl v. Bay Colony Club

Condo, Inc., 398 So. 2d 865, 867 (Fla. 4th DCA 1981). Put differently, the

agreement must be one that “‘no man in his senses and not under delusion would

make on one hand, and no honest and fair man would accept on the other.’” Bland,

927 So. 2d at 252 (citation omitted).

These definitions are well-worn and clear. They provide courts with

predictable standards against which to evaluate facts, which fosters consistency

and predictability.14 Florida’s choice of firm standards that are challenging to

satisfy has been deliberate and well-grounded in doctrines favoring enforcement of

contracts and voiding them only in exceptional circumstances.15

14 In one of the more dramatic analogies by an amicus curiae, it is asserted that the independent analysis test would lead to absurd results like the enforcement of the contract to take a pound of flesh in Shakespeare’s Merchant of Venice. This result has not occurred, and this example demonstrates the argument’s fallacy. Such contracts are unenforceable on many grounds, including illegality, impossibility, and unlawful penalty, to name a few. However, if Antonio could show he agreed to the deal under duress (procedural unconscionability), it is conceded that the clause has “shocked the conscience” for more than 400 years.

15 Like federal law, Florida also favors the enforcement of arbitration agreements. Miele v. Prudential-Bache Secs., Inc., 656 So. 2d 470, 473 (Fla. 1995) (“[A]rbitration is a favored means of dispute resolution.”). Indeed, Florida “public

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3. The Court Should Reject The “Exculpatory Clause” And “Sliding Scale” Tests For Unconscionability.

While there may be some “tension” among the DCAs on the proper

enunciation of the standard, there is no reason to rewrite fundamentally the law of

unconscionability in Florida. Pendergast proposes a radical departure from

existing law that would entangle two currently-separate doctrines, diluting the

doctrine of unconscionability and tipping the scales decidedly away from the

enforcement and certainty of contracts.

Pendergast proposes two options, a new “exculpatory clause” test for the

unconscionability of contracts and an alternative sliding scale test that would

incorporate a presumption that all standard form consumer contracts are

procedurally unconscionable. Both would make bad law and bad policy.

First, the exculpatory clause test is unnecessary. There is no need to expand

the law of unconscionability. Florida already recognizes numerous other grounds

on which to refuse to enforce agreements that are deficient or grossly unfair.16

policy … favors arbitration because it is efficient and avoids the time, delay and expense associated with litigation.” Regency Group, Inc. v. McDaniels, 647 So. 2d 192, 193 (Fla. 1st DCA 1994). 16 These doctrines include lack of consideration, meeting of the minds, mutuality of obligation, fraud, mistake and duress. Courts also construe ambiguous contracts against their drafters, and void unlawful penalty clauses. See Fla. Jur. 2d, Contracts §§ 11, 21, 76, 145; id. Damages § 106.

Indeed, Florida already has a public policy against contract clauses that exculpate

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one party under certain circumstances.17

Second, both of Pendergast’s proposed tests would eliminate procedural

unconscionability as a required element. In the exculpatory clause test, Pendergast

would eliminate the need to show procedural unconscionability entirely. Br. at 31.

In the sliding scale test he would consider it satisfied automatically in any

consumer form contract, i.e., contract of adhesion,

Florida also has a public policy against

contract clauses that defeat the remedial purposes of a statute. See Fonte v. AT&T

Wireless, 903 So. 2d at 1024 (class arbitration waiver did not defeat remedial

purpose of FDUTPA). Leaving aside whether these doctrines have any application

to the facts of this case (which they do not, as shown below), there is no reason to

infuse these doctrines into the analysis of unconscionability.

18

Pendergast does not and cannot cite to a single case from Florida that has

adopted this approach to unconscionability. He also fails to present any

justification for this Court to overturn established precedent, effectively eliminate

because in his view such

contracts reduce “meaningful choice” sufficiently to satisfy a minimal showing of

procedural unconscionability for a sliding scale test. Id. at 33.

17 For example, in Rollins, Inc. v. Heller, 454 So. 2d 580, 583, cited by Pendergast at page 27 of his brief, the court held that in some contexts “[i]t is well-settled that exculpatory and limitation of damages provisions are valid and enforceable . . . .” 18 Pendergast suggests that Pasteur Health Plan, Inc. v. Salazar, 658 So. 2d 543 (Fla. 3d DCA 1995) supports this view, Br. at 33, but the case does not even address unconscionability. Rather, Pasteur applied the time-honored rule of interpreting an insurance contract against its drafter.

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one of the two elements of unconscionability, and substantially weaken the

doctrine, other than a desire to create a right to file class actions.

Third, relaxing or eliminating the procedural unconscionability requirement

would allow a party to evade a contract on unconscionability grounds where the

party had a meaningful choice and willingly chose to enter into the contract. This

would invite lower courts to substitute their value judgments for the choices of

contracting parties on a case-by-case basis – precisely what Florida law prohibits.

Beach Resort Hotel Corp., 79 So. 2d at 663.

Indeed, a sliding scale analysis by its nature would foster unpredictable and

inconsistent results. Unlike a balancing test for injunctive relief where the

elements lend themselves to ranges of likelihood (e.g., future harm, probable

success on the merits), the standards for procedural and substantive

unconscionability are absolutes that do not lend them themselves to sliding scales.

Parties might disagree on whether sufficient proof exists, but either there is an

“absence of meaningful choice” or there is not. Either a contract “shocks the

conscience” or it does not. What would it mean to determine that there is “some

chance” or a “reasonable possibility” that “‘no man in his senses and not under

delusion would make [a contract] on one hand, and no honest and fair man would

accept [it] on the other?’” See, e.g., Cert. Op. at 44. The independent analysis test

does not have these problems.

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Fourth, it is clear that Pendergast wishes to tip the scale in favor of class

action litigation, but there can be no dispute that standard form contracts are

necessary and proper if businesses serving large numbers of consumers are to

provide services efficiently and cost-effectively. See In re Managed Care Litig.,

No. 00-1334-MD, 2009 WL 855963, at *5 (S.D. Fla. Mar. 30, 2009) (“Courts

around the country have recognized that the need for pre-printed form contracts is

a stark reality of today’s mass-production/consumer culture.”). Even if it were

possible to negotiate each term of a consumer contract with millions of consumers

every day, it would be prohibitively expensive on all sides.19

As shown above, the FAA embodies federal policy favoring arbitration

agreements, which must be enforced “according to their terms.” Stolt-Nielsen S.A.

No Florida court has

ever held that all standard consumer contracts are or should be considered

procedurally unconscionable, as Pendergast proposes.

Finally, because Pendergast’s proposals would outlaw traditional bilateral

arbitration in consumer contracts – necessarily prohibiting enforcement of

individual arbitration agreements in standard contracts as substantively

unconscionable – the proposals should be rejected as contrary to federal law.

19 See 1 Corbin on Contracts § 1.4 (Rev. Ed. 1993) (“The standardization of forms for contracts is a rational and economically efficient response to the rapidity of market transactions and the high costs of negotiations.”); Restatement (Second) of Contracts § 211 cmt. a (1981) (“Standardization of agreements serves many of the

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v. AnimalFeeds Int’l Corp., 2010 WL 1655826, at *11. Those terms may include

whether arbitration will be bilateral or classwide. Id. at *12, *13. And while an

arbitration agreement may be held unenforceable on state law grounds applicable

to all contracts generally,20

Second, the proposed rule would undermine “[a] prime objective of an

agreement to arbitrate,” i.e., “to achieve ‘streamlined proceedings and expeditious

results.’” Preston v. Ferrer, 552 U.S. 346, 357 (2008) (citing Mitsubishi Motors

Pendergast’s proposed new Florida standard is

designed to apply to class waivers and class arbitration waivers specifically.

Pendergast’s rule would presume class arbitration waivers in consumer

contracts are exculpatory because, he argues, only class actions can vindicate small

claims. Although couched in terms of the generally-applicable doctrine of

unconscionability, this constitutes a rule hostile to arbitration agreements because

it undermines three foundational principles of the FAA. First, as discussed above,

parties are “‘generally free to structure their arbitration agreements as they see

fit,’” Stolt-Nielsen, 2010 WL 1655826, at *12 (internal citation omitted).

Pendergast’s rule would eliminate the bilateral arbitration structure.

same functions as standardization of goods and services; both are essential to a system of mass production and distribution.”) (emphasis added). 20 See 9 U.S.C. § 2 (arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract”); Preston v. Ferrer, 552 U.S. 346, 347 (2008) (FAA forbids states from “impos[ing] prerequisites to enforcement of an arbitration agreement that are not applicable to contracts generally.”).

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Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 633 (1985)). The benefits of

bilateral arbitration that the U.S. Supreme Court has recognized (“lower costs,

greater efficiency and speed”) always would be unavailable in consumer cases in

Florida, and the only option for arbitration would be classwide even though “the

relative benefits of class-action arbitration are much less assured.” See Stolt-

Nielsen., 2010 WL 1655826, at *13.

Third, a per se rule in Florida that consumer arbitrations must be classwide

would work a “fundamental” change because, among other things, an arbitrator

“no longer resolves a single dispute between the parties to a single agreement, but

instead resolves many disputes between hundreds or perhaps even thousands of

parties.” Id. at *13. When Congress adopted the FAA in 1925, it did not intend to

void traditional bilateral arbitration agreements in favor of a then-novel class-

arbitration procedure.21

21 David S. Clancy & Matthew M.K. Stein, An Uninvited Guest: Class Arbitration and the Federal Arbitration Act’s Legislative History, 63 BUS. LAW. 55, 57 (2007) (“[T]he FAA’s legislative history indicates that Congress was opening the door to a particular kind of non-judicial dispute resolution proceeding, and class arbitration is a different kind of proceeding – apart from its non-judicial nature, it has little in common with what Congress approved in 1925.”). Indeed, the AAA did not promulgate rules for class arbitration until 2003. Id. at 56 & n.1.

Consequently, Pendergast’s proposal for a new public policy, if adopted by

this Court, would conflict with the federal policies embedded within the FAA and

would be preempted as a matter of federal law.

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B. The Class Arbitration Waiver In Pendergast’s Contract With Sprint Is Not Procedurally Unconscionable.

1. Pendergast Cannot Establish Procedural Unconscionability Because He Cannot Establish That He Personally Lacked A Meaningful Choice.

As the Eleventh Circuit recognized, “[u]nder Florida law, a central question

in the procedural unconscionability analysis is whether the consumer has an

absence of meaningful choice in whether to accept the contract terms.” Cert. Op.

at 34-35 (citing Belcher v. Kier, 558 So. 2d 1039, 1042 (Fla. 2d DCA 1990));

Lanca Homeowners, 541 So. 2d at 1124. This analysis must be conducted on an

individual rather than classwide basis.22 “[A]llegations of procedural

unconscionability must clearly demonstrate the absence of meaningful choice on

the part of the plaintiff.” Kohl v. Bay Colony Club Condo., Inc., 398 So. 2d 865

(Fla. 4th DCA 1981).23

As the federal district court correctly held, Pendergast had a meaningful

choice to accept or reject the class arbitration waiver, and it was not procedurally

22 See Romano v. Manor Care, Inc., 861 So. 2d 59, 62 (Fla. 4th DCA 2003) (“Procedural unconscionability refers to the individualized circumstances under which the contract is entered.”) (emphasis added); Complete Interiors v. Behan, 558 So. 2d 48, 52 (Fla. 5th DCA 1990) (same). For this reason, among others, Pendergast’s unsupported allegations and arguments regarding “17 million” other Sprint subscribers are irrelevant. 23 Powertel, Inc. v. Bexley, 743 So. 2d 570 (Fla. 1st DCA 1999) is not to the contrary. In that case, the court determined that a class waiver was unenforceable against the lead plaintiff because she did not receive notice of the waiver until after she had filed her lawsuit. Id. at 574, 577.

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unconscionable. See Cert. Op. at 35. First, it is undisputed that Pendergast

accepted a contract with Sprint containing a class waiver on July 2, 2005. On that

day, Pendergast purchased a phone that contained a copy of Sprint’s 6/30/04

Ts&Cs in its box. Cert. Op. at 8. The same day, Pendergast executed a short

Advantage Agreement that expanded his service to a second line. Cert. Op. at 12;

Doc. 33-6, ¶ 15, Doc. 33-9. When Pendergast executed the Agreement, he

explicitly stated that he had read the Ts&Cs then in effect, i.e., the 6/30/04 Ts&Cs,

and expressly confirmed that he agreed to be bound by them. Cert. Op. at 13, 42;

Doc. 33-6, ¶¶ 16-17; Doc. 33-9 at 1, 2. The 6/30/04 Ts&Cs included a class

waiver in the arbitration agreement, Cert. Op. at 10-11; Doc. 33-17 at 8, which

became applicable to all services Pendergast purchased from Sprint. Cert. Op. at

9; Doc. 33-17 at 2. Pendergast has offered no testimony claiming he was unaware

of the class waiver when he agreed to it in 2005. See Doc. 29-2; Doc. 42-5.

Second, the arbitration and class waiver provisions were prominent and

understandable. The contract repeatedly and prominently disclosed the existence

of the arbitration provision and advised that it was set forth in full in the 6/30/04

Ts&Cs. Cert. Op. at 13.24

24 See also Doc. 33-9 at 2 (“MANDATORY ARBITRATION. As set forth more completely in the Ts&Cs, you agree to a mandatory arbitration provision . . . .”) (emphasis in original), 3 (“THIS CONTRACT CONTAINS A BINDING ARBITATION AGREEMENT WHICH MAY BE ENFORCED . . . .”) (emphasis in original).

Further, as the Eleventh Circuit recognized, the

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arbitration and class waiver provisions were “relatively easy for nonlawyers to

understand,” “clearly demarcated from the rest of the document and emphasized by

being in either bold, all caps, boxes, or all three,” and “visually distinct from the

rest of the contract.” Cert. Op. at 42.25

Third, Pendergast had an opportunity to reject the contract. In July 2005,

Pendergast’s initial two-year contract with Sprint from 2001, Cert. Op. at 3; Doc.

33-6, ¶ 7, had long since expired, and he was free to terminate service at any time

without any fee. Cert. Op. at 12-13; Doc. 33-17 at 3 (“Termination of Services”).

In addition, even after he had signed the contract and used the phone, the

Advantage Agreement gave Pendergast 14 days to consider the Ts&Cs further and

to cancel service without an early termination fee. Cert. Op. at 13; Doc. 33-9 at 3

(“Return Policy”). As the federal district court concluded, Pendergast “had notice

of the class [arbitration] waiver when he executed the 2005 Advantage Agreement,

and moreover, had 14-days if he wanted to reject the waiver and discontinue

service without a termination fee.” Doc. 60 at 5; Cert. Op. at 35.

Again, Pendergast offered no testimony

that he had any trouble understanding these provisions. See Doc. 29-2; Doc. 42-5.

25 Pendergast relies heavily on the fact that his contract was an “adhesion contract” to establish procedural unconscionability. Br. at 36. Although the word “adhesion” has a negative connotation, there is nothing inherently wrong with such contracts. Many contracts are printed on standard forms, and that does not make them procedurally unconscionable under existing Florida law. Orkin Exterminating Co. v. Petsch, 872 So. 2d 259, 265 (Fla. 2d DCA 2004); Gainesville

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Fourth, at the time Pendergast executed the Advantage Agreement “at least

two of Sprint’s competitors – Virgin Mobile and TracFone – offered mobile phone

service in his area without class action waivers.”26 Cert. Op. at 12; Docs. 44-3,

¶¶ 5-11; 44-4 through 44-8. The trial court rejected Pendergast’s make-weight

argument that these carriers would not have offered suitable alternatives to Sprint.

Doc. 60 at 5 & n.7.27

Health Care Ctr., Inc. v. Weston, 857 So. 2d 278 (Fla. 1st DCA 2003); Fonte v. AT&T Wireless Servs., Inc., 903 So. 2d 1019, 1025 n.2 (Fla. 4th DCA 2005). 26 While Pendergast avers that in 2005 carriers controlling 90% of the market required customers to waive class proceedings, Br. at 8 n.7, he relies on examples of class waivers from later periods. 27 Pendergast’s principal criticism of TracFone, Br. at 9, was that it did not offer comparable service because it had settled a class action alleging improper roaming charges. As the trial court noted, however, Doc. 60 at 5 n.7, the order approving the settlement states that TracFone “vigorously denied all liability in the litigation,” and the order further found that if the case went to trial “the Class members [would] face a very real risk of not prevailing with regard to the merits.” Doc. 54-6 at 2, 3. Pendergast’s complaint about Virgin Mobile – that it operated on Sprint’s network and would have “the same coverage problems” – shows that it was comparable, and his complaint that he would have suffered greatly because Virgin Mobile did not offer roaming, Br. at 8-9, is equally specious. In two years Pendergast used about 90 seconds of roaming service a month, hardly grounds for distinction. See Doc. 58-2, ¶¶ 4-7; Cert. Op. at 41 (characterizing Pendergast’s distinctions as “de minimus differences”) (emphasis in original).

See also Voicestream Wireless, 912 So. 2d at 40 (rejecting

claim that “meaningful alternatives” requires exact product be made available).

The record is clear that in July 2005 Pendergast could have obtained service from

another carrier without a class waiver. Nor has Pendergast ever claimed that he

tried to find alternative service but was unable to do so. See Doc. 29-2; Doc. 42-5.

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Fifth, it is undisputed that if Pendergast had wanted to change providers, he

could have taken his phone number with him. Since 2003, FCC rules have

guaranteed the portability of phone numbers. See Cert. Op. at 26; 47 C.F.R.

§ 52.31; Docs. 44-3, ¶ 12 & 44-9. In fact, when Pendergast did eventually leave

Sprint he cancelled service simply by having his number transferred to a new

provider. Cert. Op. at 25-26; Doc. 33-6, ¶ 33.

These facts offer one of several crucial distinctions between this case and

Powertel, on which Pendergast heavily relies. Powertel was decided in 1999 and

relied heavily on the fact that telephone numbers were not portable at the time.

The Powertel court observed, “[i]t is reasonable to assume that some customers

may suffer a great deal of inconvenience and expense to obtain and publish a new

telephone number. Hence, it is no answer to say that customers can simply switch

providers.” See 743 So. 2d at 575.28

Sixth, Pendergast has not shown that he would have lost any appreciable

investment in phone equipment if he had terminated his service with Sprint. In

fact, Pendergast concedes that if he had chosen to cancel his service when he

received notice of the class waiver provision in 2005, he could have returned his

new phone and received a full refund. Cert. Op. at 40 n.18; Br. at 7. Even

28 Pendergast misstates the holding in Powertel by omitting this critical language and suggesting that the court based its holding solely on the fact that members of the putative class would have lost their investments in equipment. Br. at 38.

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assuming Pendergast’s used phone had more than nominal value,29 he presented no

evidence that he was unable to recoup its fair value by selling it to another Sprint

subscriber, as the Eleventh Circuit found he could have done. Cert. Op. at 40, 42.30

Pendergast spends much of his brief claiming he never had notice of the

class waiver or had no choice but to accept it. He claims the 6/30/04 Ts&Cs were

“imposed” on him without notice and consent.

2. Pendergast Cannot Repudiate His Acceptance Of The Contract In July 2005 By Implying That He Did Not Receive Prior Notice Of Its Terms.

31 Id. at 36. In his words, he was

“stuck.”32

29 Sprint subsidizes phone sales. Cert. Op. at 42; Br. at 6-7. 30 The reference to Pendergast’s phone as “non-transferable,” Br. at 7, meant it would not work on another network, but Pendergast could have sold it to a third party for use on Sprint’s network. Cert. Op. at 7. It is undisputed that a ready market for used wireless phones existed when Pendergast expanded his service in 2005. Doc. 44-2, ¶¶ 7-11; Docs. 44-3, ¶¶ 13-14, 44-10, 44-11 (tens of thousands of wireless phones offered for sale on eBay in 2004 and later). Powertel did not consider whether such a market existed in 1998. 31 Pendergast incorrectly asserts that the district court “found” that Sprint “unilaterally imposed” the 6/30/04 Ts&Cs on him. Br. at 36. In fact, the court merely summarized his arguments before rejecting them. Doc. 60 at 4. 32 Nowhere in the record does Pendergast deny that he actually received notice of Sprint’s 6/30/04 Ts&Cs in 2004. Although he repeatedly faults Sprint for its inability in 2008 to produce evidence of providing an actual notice in 2004, Br. at 36, he presented no affidavit or evidence on this issue himself. In addition, the record does not support Pendergast’s repeated assertions that Sprint never provided notice of the 6/30/04 Ts&Cs to members of the putative class. While Sprint identified instances in 2004 where it could demonstrate (by reviewing records in 2008) that it had provided notice of changes to the Ts&Cs to Pendergast, it never undertook this exercise with respect to anyone else. See Doc. 54-3 at 2.

Pendergast’s argument fails for several reasons.

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First, whether Pendergast received notice of the 6/30/04 Ts&Cs in 2004 is

irrelevant. There is no dispute that Pendergast received notice of and accepted the

6/30/04 Ts&Cs in July 2005, at the very latest. Cert. Op. at 13.33

Second, even crediting Pendergast’s own argument, he would have had a

meaningful choice whether to accept or reject the class waiver in July 2005.

Pendergast asserts that the updating provision of the 5/22/01 Ts&Cs was

unenforceable because it permitted Sprint to update the Ts&Cs without notice and

– although he never presented evidence supporting this claim – he supposedly

never received contemporaneous notice of the 6/30/04 Ts&Cs. Br. at 60 n.40.

Accepting all this as true, Sprint’s adoption of the 6/30/04 Ts&Cs without notice to

Pendergast would not have altered Pendergast’s contract with Sprint, at least not

until he received and accepted them in July 2005. Thus, even under his own

theory, Pendergast would have been free to avoid the class waiver in July 2005 by

rejecting the 6/30/04 Ts&Cs at that time and terminating his contract with Sprint.

That is sufficient

to establish notice and consent in this case.

34

33 Pendergast claims “the new contract signed by the Plaintiff in July 2005 made no mention of the class action waiver.” Br. at 36 n.24. This is false. As the Eleventh Circuit explained, the class waiver was prominently disclosed in the Ts&Cs Pendergast received when he signed the Advantage Agreement. Cert. Op. at 12-13. The Ts&Cs were clearly referenced in the Agreement, and Pendergast agreed he had read them. Id.

34 Pendergast does not challenge his acceptance of post-August 2005 updates to the Ts&Cs. His procedural unconscionability arguments relate solely to his acceptance of the 6/30/04 Ts&Cs.

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Third, regardless of whether Pendergast already hypothetically might have

“felt bound” by the class waiver when he signed his Advantage Agreement in July

2005,35

Finally, nothing in the arbitration agreement ever provided Pendergast with a

right to class arbitration, so determining when (or whether) he received notice of a

waiver of that right cannot be relevant. The 5/22/01 Ts&Cs provided for

arbitration but were silent on whether the parties agreed to class arbitration. Doc.

33-16 at 11. As the Supreme Court recently made clear, an arbitration agreement

must affirmatively authorize class arbitration for any party to be bound to that

process. Stolt-Nielsen, 2010 WL 1655826, at *13. Sprint’s contract with

Pendergast never did this. Thus, even if Pendergast had not received notice of the

he still had a choice whether to accept the class waiver going forward or to

purchase service from another provider without a waiver. Nothing in 2005 bound

him to accept the class waiver and continue to purchase services from Sprint. If he

valued the right to class actions and was willing to forgo the benefits of individual

arbitration, he could have walked away.

35 Pendergast claims that because the 5/22/01 Ts&Cs allowed Sprint to amend the Ts&Cs without notice and allegedly remained in place until 2004, the 6/30/04 Ts&Cs became effective without notice in June 2004. Br. at 3. This is incorrect. Sprint’s November 24, 2003 Ts&Cs required notice of changes and provided customers an opportunity to reject material changes. See http://web.archive.org /web/20031208191205/http://sprintpcs.com/common/popups/popLegalTermsPrivacy.html; see also Br. at 5 (acknowledging that Sprint provided notice of revised Ts&Cs that preceded 6/30/04 Ts&Cs); Doc. 54-3 at 2.

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class arbitration waiver until July 2005, notice of a waiver of a right he did not

have would be irrelevant.

3. Pendergast’s Criticisms Of The District Court And His Sliding Scale Arguments Have No Merit.

Pendergast argues that the district court held that “no procedure for

obtaining [a challenged contract clause] is unconscionable” so long as there is a

market alternative to the product that is linked to the contract provision. Br. at 41,

44. According to Pendergast, the district court concluded that “anything goes” so

long as a consumer can purchase an alternative without agreeing to a challenged

contract provision. This badly misstates the district court’s decision, which merely

held that Pendergast had a meaningful choice to accept or reject the class waiver

because he had notice and that nothing prevented him from rejecting it. See Cert.

Op. at 13; Doc. 60 at 2, 4-5.36

In any event, while not necessarily a make-or-break benchmark for

procedural unconscionability, consideration of market alternatives is consistent

36 This distinguishes In re NationsRent Rental Fee Litigation, No. 06-60924-CIV, 2009 WL 636188, at *9 (S.D. Fla. Feb. 24, 2009), in which the plaintiffs lacked sufficient knowledge to select an alternative. Reuter v. Davis, No. 502001CA001164XXXXMB, 2006 WL 3743016, at *3 (Fla. 15th Cir. Dec. 12, 2006) also is distinguishable because the plaintiff simultaneously relied on multiple payday loan companies to obtain credit and could not have avoided the clause by doing business elsewhere.

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with Florida law.37 See, e.g., Orkin Exterminating Co. v. Petsch, 872 So. 2d 259,

265 (Fla. 2d DCA 2004) (arbitration provision not procedurally unconscionable

where plaintiff failed to show “that he could not have obtained termite services for

his home without acquiescing to Orkin’s terms”).38

For example, in Palm Beach Motors Ltd. v. Jeffries, 885 So. 2d 990 (Fla. 4th

DCA 2004), the court based its finding of procedural unconscionability on

The district court properly

considered market alternatives, which Pendergast himself had raised, in finding his

acceptance of the class waiver was not procedurally unconscionable.

Pendergast also asserts he can establish procedural unconscionability under a

presumably more lenient sliding scale test employed in a few Florida cases. Br. at

45 & n.30. In fact, however, the cases Pendergast cites confirm the high threshold

applicable to establish procedural unconscionability in Florida, even in cases

applying a sliding scale test. Pendergast attempts to avoid this problem by

omitting key facts.

37 Pendergast relies on California cases where courts held the existence of market alternatives was insufficient evidence to defeat a showing of procedural unconscionability. Br. at 42-43. Unlike Florida, procedural unconscionability may be found under California law based solely on the existence of a standard consumer contract. These cases are inapposite. 38 See also Bhim v. Rent-A-Center, Inc., 655 F. Supp. 2d 1307, 1315 (S.D. Fla. 2009) (arbitration agreement not procedurally unconscionable where plaintiff has not shown a lack of alternatives); Henry v. Pizza Hut of Am., Inc., No. 6:07-cv-01128-Orl-DAB, 2007 WL 2827722, at *7 (M.D. Fla. Sept. 27, 2007) (same); CC-Aventura, Inc. v. The Weitz Co., LLC, No. 06-21598-CIV, 2009 WL 3326806, at *5 (S.D. Fla. Oct. 9, 2009) (same).

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evidence that the defendant car dealer “actively discouraged and/or prevented the

purchaser from knowing and understanding the disputed contract terms.” Id. at

993.39 Similarly, in Hialeah Automotive v. Basulto, 22 So. 3d 586 (Fla. 3d DCA

2009), the court relied on evidence of blatant deception.40 And in Romano v.

Manor Care, Inc., 861 So. 2d 59 (Fla. 4th DCA 2004), the court relied on clear

evidence of overreaching.41 In Lanca Homeowners, which did not apply a sliding

scale, the Court found an absence of meaningful choice because the plaintiffs’ only

alternative to accepting the contract terms was to leave their homes.42

39 The arbitration provision was hidden with other terms on the back of an order form that was one of approximately a dozen papers the plaintiff had to sign at closing. 885 So. 2d at 991. The car dealer’s personnel made it a practice never to show customers the back of the form, never to mention the arbitration provision to customers, and never to obtain any written assent to the terms on the back of the form. See 885 So. 2d at 992-93. 40 The defendant car dealer actively sought Spanish-speaking customers who could neither read nor write English, presented them with a contract entirely in English and offered a misleading Spanish translation. Id. 41 The defendant nursing home admitted the elderly plaintiff’s injured, seventy-nine-year-old wife and then, a day later, gave him eight separate documents, including a six-page arbitration agreement, he was required to sign. Id. at 61. The court suspected the elderly plaintiff might not have understood the arbitration agreement and emphasized that the plaintiff did not know whether his refusal to sign the documents might affect his injured wife’s ability to stay in the nursing home. Id. at 63.

42 Mobile home park tenants were subjected to unilateral rent increases “imposed across the board . . . after the initial rental agreement ha[d] been entered into” and their “mobile homes [had] become affixed to the land.” 541 So. 2d at 1124. The residents experienced an “absence of meaningful choice” because “park residents have little choice but to accept the increase. They must accept it or, in many cases, sell their homes or undertake the considerable expense of uprooting and moving.”

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These cases are plainly distinguishable. Pendergast had full notice of the

arbitration provision containing the class waiver long before Sprint sought to

enforce it. The notice was in plain English, in bold letters, and prominently and

repeatedly displayed in the Advantage Agreement and in the Ts&Cs. Pendergast

never testified, or even alleged, that he was unaware of the class waiver, that he

had trouble understanding it, or that he found it objectionable in any way. The

undisputed evidence is that when offered a meaningful opportunity to accept or

reject the class waiver, Pendergast accepted it and continued to accept Sprint

service for more than two years.

C. The Class Arbitration Waiver In Pendergast’s Contract With Sprint Is Not Substantively Unconscionable.

A party bears a heavy burden to demonstrate substantive unconscionability

under Florida law. The contract provision must be so “outrageously unfair” as to

“shock the judicial conscience.” Bland v. Health Care & Retirement Corp. of Am.,

927 So. 2d 252, 256 (Fla. 2d DCA 2006); Kohl v. Bay Colony Club Condo, Inc.,

398 So. 2d 865, 867 (Fla. 4th DCA 1981). It must be an agreement that “‘no man

in his senses and not under delusion would make on the one hand, and no honest

and fair man would accept on the other.’” Cert. Op. at 44 (citing Belcher, 558 So.

Id. It cannot seriously be argued that any inconvenience Pendergast faced in switching phone companies was equivalent to the facts in these cases.

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2d at 1044) (quoting Hume v. United States, 132 U.S. 406, 10 S. Ct. 134 (1889)).

Pendergast does not come close to satisfying this heavy burden.

1. The U.S. Supreme Court Decision In Stolt-Nielsen Demonstrates That Class Arbitration Waivers Cannot Be Substantively Unconscionable Per Se.

Pendergast argues that the disadvantages of his class waiver so heavily

outweigh its advantages that it is outrageously unfair and conscience shocking, and

therefore substantively unconscionable. To the contrary, the U.S. Supreme Court’s

decision in Stolt-Nielsen demonstrates that class arbitration waivers in consumer

contracts are not outrageously unfair and therefore cannot be considered

substantively unconscionable.

In Stolt-Nielsen, the Court found that while parties to bilateral arbitration

“realize the benefits of private dispute resolution: lower costs, greater efficiency

and speed,” parties to classwide arbitration might not obtain the advantages of that

fundamentally different process because “the relative benefits of class-action

arbitration are much less assured.” 2010 WL 1655826, at *13.

Based on this reasoning, Pendergast’s class waiver cannot be considered

substantively unconscionable. It is entirely rational for parties to prefer the

benefits of traditional bilateral arbitration over the fundamentally different

“relative benefits” of classwide proceedings. And this reasoning applies with

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equal force to consumers.43

Second, the Florida appellate cases that Pendergast claims hold class waivers

substantively unconscionable either make no mention of substantive

unconscionability at all or do so only in dicta. As the Eleventh Circuit found,

Pendergast’s cases are “either mis-stated, mis-cited, or otherwise do not support

It certainly cannot be considered outrageously unfair

or conscience shocking for parties to agree to arbitrate on a bilateral basis.

2. Pendergast Is Wrong That Prior Florida Jurisprudence Has Found Class Waivers Substantively Unconscionable.

Pendergast argues that Florida courts have been uniform in striking class

action bans, asserting that “[a]ll of the cases that have reached this issue have

found class action bans to be substantively unconscionable ….” Br. at 46.

There are several flaws in this argument. First, the implication that Florida

courts consider class waivers substantively unconscionable per se is false. No

Florida court has applied or even implied such a rule, and all the courts to address

the issue (addressed below) have considered only whether the specific class waiver

provisions before them were substantively unconscionable.

43 The Supreme Court has long recognized that “Congress, when enacting [the FAA], had the needs of consumers . . . in mind,” and “arbitration’s advantages,” e.g., its expedition, cost savings, simplicity, and informality “often would seem helpful to individuals, say, complaining about a product, who need a less expensive alternative to litigation.” Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 265, 280 (1995).

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[Pendergast’s] position.” Cert. Op. at 47 n.23.44 This is also true for two cases on

which Pendergast heavily relies, which the Eleventh Circuit correctly found “are

materially different” from this case, Powertel, 743 So. 2d at 576-77 & n.2 (dicta

examining substantive unconscionability solely in connection with potential claims

of hypothetical future members of uncertified class) and Bellsouth Mobility, LLC

v. Christopher, 819 So. 2d 171, 173 (Fla. 4th DCA 2002) (not ruling on

unconscionability).45

44 The Eleventh Circuit’s examples were Reuter v. Davis, 2006 WL 3743016, a trial court decision that neither considered nor addressed the issues raised here, America Online Inc. v. Pasieka, 870 So. 2d 170 (Fla. 1st DCA 2004), which analyzed improper venue without discussing unconscionability or class action waivers, and Reeves v. Ace Cash Express, Inc., 937 So. 2d 1136 (Fla. 2d DCA 2006), which addressed arbitrability without discussing unconscionability. 45 Pendergast also relies on the Georgia law analysis in Dale v. Comcast Corp., 498 F.3d 1216 (11th Cir. 2007), but the Eleventh Circuit found that decisions like this “do not help much in this Florida case with its own set of unique facts.” Cert. Op. at 46 n.22. Even Dale stressed that enforceability of a particular class arbitration waiver “must be determined on a case-by-case basis, considering the totality of the facts and circumstances.” 498 F.3d at 1224. This case also is distinguishable from Dale, in part because the class waiver here does not allow for “unchecked market behavior,” and Dale did not consider the adequacy of government enforcement. Further, Pendergast’s reliance on dicta (lacking any analysis) from the Eleventh Circuit’s unpublished decision in Rollins, Inc. v. Garrett, 176 Fed. Appx. 968 (11th Cir. 2006) is unavailing. Unpublished opinions are not binding, Eleventh Circuit Rule 36-2, and the passage Pendergast cites is dicta because the arbitration agreement did not contain a class waiver. Id. at 968-69. The Eleventh Circuit found that neither Dale nor Rollins were helpful here.

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And third, Pendergast’s analysis ignores several decisions that have upheld

class waivers as not substantively unconscionable under Florida law,46 as well as

numerous recent decisions of other courts holding class waivers enforceable.47

46 See, e.g., Brueggemann v. NCOA Select, Inc., No. 08-80606-CIV, 2009 WL 1873651, at *3 (S.D. Fla. June 30, 2009) (class action waiver not unconscionable); Sanders v. Comcast Cable Holdings, LLC, No. 3:07-cv-918-J-33HTS, 2008 WL 150479, at *7-10 (M.D. Fla. Jan. 14, 2008); La Torre v. BSF Retail & Commercial Operations, LLC, No. 08-22046-CIV, 2008 WL 5156301, at *5 (S.D. Fla. Dec. 8, 2008); Cruz v. Cingular Wireless, LLC, No. 2:07-cv-714-FtM-29DNF, 2008 WL 4279690, at *3-*4 (M.D. Fla. Sept. 15, 2008); Rivera v. AT&T Corp., 420 F. Supp. 2d 1312, 1322 (S.D. Fla. 2006); Hughes v. Alltel Corp., No. 4-03-CV-127-SPM, 2004 U.S. Dist. LEXIS 20705, at *13-15 (N.D. Fla. Mar. 31, 2004).

See

Ambrose, 2010 WL 1270712, at *4 (acknowledging that majority of state and

federal courts find class waivers not unconscionable); Coady v. Cross Country

Bank, 729 N.W.2d 732, 746 (Wis. Ct. App. 2007) (same; cited by Pendergast).

47 See, e.g., Ambrose v. Comcast Corp., No. 3:09-cv-182, 2010 WL 1270712, at *4 (E.D. Tenn. March 31, 2010) (Tennessee law); Clerk v. First Bank of Del., No. 09-5121, 2010 WL 1253578, at *14-*17 (E.D. Pa. Mar. 23, 2010) (Pennsylvania law); Cicle v. Chase Bank USA, 583 F.3d 549 (8th Cir. 2009); Credit Acceptance Corp. v. Davisson, 644 F. Supp. 2d 948 (N.D. Ohio 2009); In re Jamster Mktg. Litig., 2008 WL 4858506, at *4-*6 (S.D. Cal. Nov. 10, 2008) (Illinois, Maryland, and Mississippi law); Schnuerle v. Insight Commc’ns Co., 2008 WL 4367840, at *1-*3 (Ky. Ct. App. Sept. 26, 2008) (unpublished op.) (Kentucky law); Szymkowicz v. DirecTV, Inc., 2007 WL 1424652, at *2 (D.D.C. May 9, 2007) (DC law); Hayes v. County Bank, 811 N.Y.S.2d 741, 743 (N.Y. App. Div. 2006) (New York law); Spann v. Am. Express Travel Related Servs. Co., 224 S.W.3d 698, 714-15 (Tenn. Ct. App. 2006) (Utah law); Strand v. U.S. Bank Nat’l Ass’n ND, 693 N.W.2d 918, 926-27 (N.D. 2005) (North Dakota law); Edwards v. Blockbuster, Inc., 400 F. Supp. 2d 1305, 1309 (E.D. Okla. 2005) (Oklahoma law); Walther v. Sovereign Bank, 872 A.2d 735, 742-43 (Md. 2005) (Maryland law); AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 200 (Tex. Ct. App. 2003) (Texas law).

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3. The Dispute Resolution Mechanisms Available In Pendergast’s Arbitration Agreement Are Neither Outrageously Unfair Nor Conscience Shocking.

All Pendergast’s substantive unconscionability arguments center on one

purported fact – that without classwide proceedings his small claim necessarily

will go un-redressed, exculpating Sprint. See Cert. Op. 44-45.

Pendergast’s argument is not credible. Under Pendergast’s theory, Sprint

would have to reason that it could exact improper charges from consumers with

impunity merely because plaintiffs’ lawyers could not bring class actions. Sprint

would have to conclude this even though consumers not only could sue in small

claims court, at the FCC or in an arbitration, but also could bring their complaints

to the Attorney General’s Office, which had fourteen open investigations against

wireless carriers alone when this suit was filed, and which is authorized to recover

damages and penalties on a classwide basis and to impose broad injunctive relief.

This is illogical. Of course, not every company always acts properly, but a

company cannot feel “exculpated” – i.e., immune from liability – merely because

private class actions or class arbitrations are unavailable. Waiving a private class

action in this case is neither exculpatory nor conscience shocking.

In any event, the facts again undermine Pendergast’s argument. Despite his

dire threats, numerous courts and commentators have concluded that where, as

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here, attorneys’ fees are available to a litigant,48 it cannot be assumed that he will

be unable to retain legal counsel.49

But even accepting Pendergast’s premise that all lawyers would shun him

absent the possibility of large fees in class actions,

In addition, Pendergast bases his arguments on

the self-interested affidavits of self-described class action lawyers. Br. at 11, n.9.

Of course, their hearsay statements on other attorneys’ practices are not competent

to support the broad proposition that no consumer lawyer would ever take an

individual arbitration action. Moreover, consumers may pursue their own claims

in individualized arbitration and small claims court without attorneys.

50 the class waiver here does not

deprive Pendergast of a fair opportunity to seek redress.51

48 Pendergast “makes claims under a Florida law, the FDUTPA, that specifically allows for the permissive recovery of attorney’s fees and costs in civil suits. Fla. Stat. § 501.2105(1).” Cert. Op. at 47. 49 “[W]hen the opportunity to recover attorneys’ fees is available, lawyers will be willing to represent [plaintiffs] in arbitration.” Jenkins v. First Am. Cash Advance of Ga., 400 F.3d 868, 878 (11th Cir. 2008). FDUTPA offers reasonable attorneys’ fees based on “hours actually spent on the case” without regard to the claim size. Fla. Stat. § 501.2105(3). 50 Pendergast argues that because FDUTPA allows fees to a prevailing defendant “[n]o ethical attorney” would bring an individual FDUTPA action for fear that his client might be required to pay defense fees. Br. at 51. Nonsense. Every class action attorney (including Pendergast’s) does this when he brings a FDUTPA case. If this really were a fear, the cost of an unsuccessful class action would far exceed that of an individual arbitration.

51 Pendergast’s claim that the National Arbitration Forum (“NAF”) rules authorize imposition of discovery costs on the non-prevailing party, Br. at 12, is false. Like Fl. R. Civ. P. 1.380(a)(4), NAF Rule 29F authorizes (but does not require), the

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a. Pendergast Had A Variety Of Avenues To Pursue His Claims Against Sprint.

The Dispute Resolution provisions offered a variety of low-cost options

through which Pendergast could have pursued his claims. First, the subscriber and

Sprint are required to attempt to resolve disputes through informal dispute

resolution. Cert. Op. at 47-48; Doc. 33-19 at 22. This is a particularly favorable

mechanism because it is essentially cost-free – although for some reason

Pendergast chose not to pursue it – and leverages Sprint’s incentive to resolve

matters amicably without incurring defense costs.

Second, a subscriber can elect to pursue claims in small claims court, Cert.

Op. at 24-25; Doc. 33-19 at 22-24, without an attorney or costly expert witnesses.

Corporations have a substantial incentive to settle even meritless small-value

claims to avoid the cost of defense.

Third, the subscriber could initiate an arbitration. Sprint covers “any

arbitration administrative or filing fees above” $25 for claims for less than $1000

or “the equivalent court filing fees for a court action” for claims of $1000 or more.

Cert. Op. at 25. Unless otherwise agreed, the arbitration is held “in the county of

arbitrator to impose sanctions, costs and fees for discovery abuses. See http://www.adrforum.com/resource.aspx?id=1426.

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[the subscriber’s] last billing address.” Doc. 33-19 at 24. Pendergast’s attempt to

belittle the arbitration option are unpersuasive.52

Fourth, subscribers can have their disputes resolved by “any federal, state or

local government agency that can . . . seek relief against [Sprint] on [their] behalf.”

Cert. Op. at 25; Doc. 33-19. Thus, a subscriber can file a complaint with the

FCC

53

Specifically, subscribers can bring their complaints to the Office of the State

Attorney or Department of Legal Affairs, as the enforcing authorities empowered

to pursue violations of FDUTPA. Cert. Op. at 51; Doc. 33-19; Fla. Stat. § 501.206.

Among other powers, these agencies have authority to bring actions on behalf of

entire classes of Florida consumers.

or any Florida entity with jurisdiction over Sprint’s allegedly wrongful

practice. Cert. Op. at 25; Doc. 33-19 at 24.

54

52 Pendergast’s statistics are inapplicable. Sprint did not routinely participate in NAF arbitrations from 2003-2008, Br. at 27, because its Ts&Cs did not specify that forum until 2007. Doc. 33-18 at 22. His AAA statistics are irrelevant because Sprint used arbitral forums other than AAA during 2003-2008. See, Doc. 33-17 at 8; Doc. 33-18 at 22; Doc. 33-19 at 23. And Pendergast’s statistics ignore altogether the significant number of cases resolved by informal dispute resolution and small claims court, as well as through government agency actions. 53 See 47 U.S.C. § 201(b) (declaring “unjust or unreasonable” charges and practices to be “unlawful”); 47 U.S.C. § 207 (authorizing complaints to FCC); 47 U.S.C. § 208 (setting forth complaint procedures).

54 Pendergast concedes the Attorney General may bring class actions on behalf of Florida citizens but asserts “the plain language of Sprint’s terms and conditions” prohibits consumers from participating. Br. at 54. This is false. Cert. Op. at 25 (“[T]his arbitration provision does not prevent you from filing your dispute with

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As the Eleventh Circuit explained, the many alternatives available to

Pendergast undermine his argument on substantive unconscionability:

In short, the only avenue taken away from the Plaintiff by the arbitration/class action waiver is a class action itself which, although providing one mechanism through which to assert several small claims, is not the only way to bring Plaintiff’s small claim. It is difficult to say in these factual circumstances that no reasonable consumer would have made this agreement or that it is so unfair as to be substantively unconscionable per se.

Cert. Op. at 48 (emphasis added);55

Rational consumers may conclude that government enforcement provides a

viable, even superior, alternative to private class action litigation. Florida’s courts

and others recognize that where, as here, government enforcement is possible,

see also Rivera v. AT&T Corp., 420 F. Supp.

2d 1312, 1322 (S.D. Fla. 2006) (class action waiver in telephone contract not

substantively unconscionable under Florida law because of other avenues for

relief). These facts also distinguish this case from Powertel, where the arbitration

agreement required that “[a]ny unresolved dispute, controversy or claim” be settled

by arbitration. 743 So. 2d at 572.

b. Government Enforcement Is A Compelling Avenue For Redress Of Customer Complaints.

any federal, state or local government agency that can, if the law allows, seek relief against us on your behalf.”). 55 Pendergast is incorrect that the district court agreed that consumers would have to forego claims against Sprint as a result of the dispute resolution agreement, Br. at 15 n.12. The district court expressly did not reach the issue of substantive unconscionability. Cert. Op. at 28; Doc. 60 at 6, n.8.

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consumers are not left without a remedy.56 Fonte, 903 So. 2d at 1025 (government

enforcement provides “another possible avenue of recovery for consumers”);

Rollins, Inc. v. Butland, 951 So. 2d 860, 880 (Fla. 2d DCA 2006) (explaining ways

in which agency enforcement of FDUTPA is superior to private class actions).57

56 See Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 174-75 (5th Cir. 2004) (availability of state attorney general suit on behalf of aggrieved consumer class does not leave plaintiffs “without remedies or so oppress them as to rise to the level of unconscionability”); Johnson v. W. Suburban Bank, 225 F.3d 366, 376 (3d Cir. 2000) (upholding agreement waiving class actions; “loss of the availability of a class action does not mean the loss of meaningful deterrence to TILA violations, insofar as public remedies [administrative proceedings] remain”); Tsadilas v. Providian Nat’l Bank, 13 A.D.3d 190, 191 (N.Y. App. Div. 2004) (class arbitration waiver enforceable because state attorney general can bring an action). 57 While Pendergast relies heavily on the bare majority opinion in Discover Bank v. Superior Court, 113 P.3d 1100 (Cal. 2005) to argue that government enforcement is insufficient, nearly half the highest court of California found class actions not essential after a thorough analysis. 113 P.3d at 1121-22. The majority opinion failed to discuss the issue, rejecting the adequacy of government enforcement in conclusory terms. Id. at 1110.

There are good reasons for this conclusion. “[G]overnment lawyers, who by

definition are not driven by profits, tend to be willing to spend more time doing the

factual and legal research needed to decide what kinds of cases should be brought,

not simply to increase revenue, but to further the public good.” John H. Beisner et

al., Class Action “Cops”: Public Servants or Private Entrepreneurs, 57 Stan. L.

Rev. 1441, 1454 (2005).

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Florida’s consumer protection authorities are empowered to seek actual

damages on behalf of consumers, as well as injunctive and declaratory relief, and

often additional penalties to punish wrongful conduct. See, e.g., Fla. Stat.

§§ 501.207, 501.2075.58 Moreover, because public servants are not faced with

conflicts of interest with respect to fee awards,59 enforcement authorities will settle

cases (or not settle them) in a manner that best serves the public interest. Indeed,

government agencies have intervened in class actions to oppose settlements that

unfairly benefit plaintiffs’ lawyers at the expense of the consuming public.60

Government enforcement also avoids a “race to the courthouse,” where competing

lawyers rush to be first to file a class action, often before conducting a fair

assessment of the merits.61

58 See also Fla. Stat. §§ 501.203(2) (designating Florida State Attorney Offices and Florida Department of Legal Affairs as enforcing authorities); 501.206 (granting special investigative powers to enforcing authorities). 59 While attorneys’ fees in private class actions enrich plaintiffs’ lawyers, attorneys’ fees under state and federal consumer protection statutes are recovered on behalf of the public and help fund further consumer protection enforcement. See, e.g., Fla. Stat. § 501.2101. 60 For example, the Attorneys General of 35 states successfully opposed a proposed settlement in a federal class action that offered only “negligible value” to the affected consumers. See Figueroa v. Sharper Image Corp., 517 F. Supp. 2d 1292 (S.D. Fla. 2007).

61 See Russell Kamerman, Securities Class Action Abuse: Protecting Small Plaintiffs’ Big Money, 29 Cardozo L. Rev. 853, 862 (2007). This case is an example of a rapid, imitated action filed on the heels of another lawsuit (now dismissed on the merits). See Johnson, 2008 WL 2949253, aff’d, 2009 WL 4919363 (4th Cir. Dec. 18, 2009).

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Pendergast has tendered submissions from cases outside Florida in which

authorities in other states pronounced themselves unable adequately to fulfill their

consumer protection roles without private class actions. As the Eleventh Circuit

observed, Cert. Op. at 48 n.24, none of these materials demonstrate anything about

the ability of the Florida Attorney General – or any other Florida authority – to

fulfill its enforcement role.62

Pendergast ignores the only relevant evidence regarding Florida public

enforcement actually before the district court. That evidence showed that at the

time the district court was considering this motion, the Florida Attorney General

was pursuing fourteen separate consumer-related investigative actions against

telecommunications providers alone, including multiple actions against T-Mobile,

AT&T and Alltel and single actions against Verizon and Sprint. Doc. 58-5.

Earlier in the year the Florida Attorney General settled an action against AT&T

over wireless services, offering restitution to all affected Florida customers. It also

provided $2.5 million in attorneys’ fees to the Attorney General (none to private

62 Pendergast’s cases are inapposite. Scott v. Cingular Wireless, 161 P.3d 1000, 1005-06 (Wash. 2007) found the class waivers at issue unconscionable because relying on government action and other mechanisms in lieu of private class actions would defeat the specific aims of Washington’s consumer protection statutes and public policies. Kristian v. Comcast Corp., 446 F.3d 25, 53-55 (1st Cir. 2006), did not address unconscionability and found that federal antitrust laws depended on a combination of public enforcement and private class actions to accomplish their remedial purposes. And neither Muhammad v. County Bank of Rehoboth Beach,

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lawyers) and required a $500,000 public education contribution – all of which will

go to funding additional public consumer protection efforts. Doc. 58-6 at 9-11.

c. It Is Neither Outrageously Unfair Nor Conscience Shocking That Rational Consumers Might Forego Private Class Actions.

In assessing whether a rational consumer might be willing to waive the right

to pursue a private class action as part of a service agreement, it is important to

consider the widely-held distrust of class actions. As one commentator put it,

“public disillusionment with class actions has grown” to the level that “[i]n one

recent nationwide poll, only 5% of the respondents thought consumers benefited

the most from class actions.” Class Action “Cops”, 57 Stan. L. Rev. at 1444

(citations omitted).

As the U.S. Senate Judiciary Committee recognized, “[a] mounting stack of

evidence . . . demonstrates that abuses [of the class action mechanism] are

undermining the rights of both plaintiffs and defendants.” S. Rep. No. 109-14, at 5

(2005) reprinted in 2005 U.S.C.C.A.N. 3, 5. The Committee concluded plaintiffs

often are not well served by class actions:

[T]he lawyers who bring the lawsuits effectively control the litigation; their clients – the injured class members – typically are not consulted about what they wish to achieve in the litigation and how they wish to proceed. In short, the clients are marginally relevant at best.

912 A.2d 88 (N.J. 2006), nor Kucan v. Advance America, 660 S.E.2d 98 (N.C. App. 2008) even addressed the adequacy of public enforcement.

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Id. The Committee also recognized that “the ability to exercise unbounded

leverage over a defendant corporation and the lure of huge attorneys’ fees

have led to the filing of many frivolous class actions.” Id. at 21. It costs

little for plaintiffs’ lawyers to request massive discovery in a class action, so

the cost of litigation itself may be used to coerce unwarranted settlements.63

Class action abuses also “have a high cost to society in terms of diminished

plaintiff recovery, imposition of a so-called ‘tort tax’ on American consumers, and

a resulting drain on the national economy.” Class Action “Cops”, 57 Stan. L. Rev.

at 1471. Reasonable consumers may well conclude that their interests are not

served by a proliferation of class actions that ultimately raise the “tort tax.”

64

Moreover, courts have expressed concerns that “‘the relationship between a

plaintiff class and its attorney may suffer from a structural flaw, a divergence of

economic interests of the class and its counsel’ . . . . creat[ing] a serious risk that

the class counsel may be an unreliable agent.”

65

63 See Twombly v. Bell Atlantic Corp., 550 U.S. 544, 559 (2007) (“[The] threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings.”) (citation omitted). 64 See Lawrence J. McQuillan & Hovannes Abramyan, The Tort Tax, Wall St. J., March 27, 2007, at A 18 (estimating the American tort system imposes an annual “tort tax” of $9,827 on a family of four).

65 Christopher R. Leslie, The Significance of Silence: Collective Action Problems and Class Action Settlements, 59 Fla. L. Rev. 71, 77 (2007) (citation omitted); see also David J. Kahne, Curbing the Abuser, Not the Abuse: A Call for Greater Professional Accountability and Stricter Ethical Guidelines for Class Action

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Various state legislatures share the view that private class actions may not be

in the best interest of consumers and have flatly prohibited class actions under their

consumer protection statutes. Alabama, Georgia, Louisiana and Mississippi are

among those states that affirmatively reject class actions as an appropriate

mechanism to enforce their consumer protection laws.66

It can hardly be considered outrageously unfair or conscience shocking for

consumers to agree to dispute resolution provisions reflecting the same policy

assessment that many courts, commentators and legislatures have made in enacting

laws to protect the consuming public.

67

Lawyers, 19 Geo. J. Legal Ethics 741 (2006); Securities Class Action Abuse, 29 Cardozo L. Rev. 853. 66 See Ala. Code § 8-9-10(f) (barring “action under this chapter . . . on behalf of a class”); Ga. Code. Ann. § 10-1-399(a) (same); La. Rev. Stat. Ann. § 51:1409 (same); Miss. Code Ann. § 75-24-15 (same). 67 Amicus party National Association of Consumer Advocates (“NACA”) argues that the arbitration clause should be held unconscionable because the arbitral forum (the NAF) supposedly is biased against consumers. This and the NACA’s other arguments are beyond the scope of certified issues and need not be addressed. In any event, the alleged unfairness of the NAF – unsupported by competent evidence – is irrelevant because (as NACA concedes) the NAF is no longer conducting consumer arbitrations. In addition, because the choice of the NAF is fully severable, Doc. 33-19 at 24, 26, the district court could designate a new arbitrator to take the place of the NAF should the parties not agree on one. 9 U.S.C. § 5; Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217, 1220 (11th Cir. 2000) (same).

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D. Pendergast Has Not Raised Any Other Basis To Void The Class Arbitration Waiver Under Florida Law.

In certifying the fourth question, the Eleventh Circuit responded to

Pendergast’s arguments that class waiver violated Florida public policy because it

purportedly was exculpatory and frustrates the remedial purpose of FDUTPA.

Cert. Op. at 50. Pendergast does not raise any other public policy grounds.68

For his principal assertion, Pendergast rehashes his argument that the class

waiver functions as an exculpatory clause.

69 As the Eleventh Circuit determined,

and as shown above, that is simply untrue. Under the Dispute Resolution

provisions, class proceedings are “not the only way to bring [Pendergast’s] small

claim.” See Cert. Op. at 48.70

68 Although addressing these arguments, Sprint continues to maintain that Pendergast waived them by failing to raise them below.

There are many avenues for relief for Pendergast

69 Pendergast relies on Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. 2006) as lead support for this proposition, but the Third Circuit repudiated this decision because it violated federal law (the FAA) by singling out an arbitration agreement to find it unconscionable. Gay v. CreditInform, 511 F.3d 369, 395 (3d Cir. 2007). See also Allied-Bruce, 513 U.S. at 281 (“What States may not do is decide that a contract is fair enough to enforce all its basic terms (price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes any such state policy unlawful ….”) (emphasis added). 70 Pendergast attempts to bolster his argument by reference to unspecified limitation of liability provisions in his contract, Br. at 58, which he did not challenge below or in the Eleventh Circuit. Cert. Op. at 45 n.21. Under the FAA, such a challenge is reserved for the arbitrator because it does not constitute “a gateway dispute.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 84 (2002); see also Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 445-46 (2006) (same). Even if those provisions were invalid, as Pendergast claims, they could be

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and other consumers, and there is no logical basis on which to conclude that Sprint

would feel immune from liability for consumer claims merely because private class

actions are unavailable.

Pendergast also cannot show that the class waiver frustrates the remedial

purposes of FDUTPA.71

severed without affecting arbitrability. See Anders v. Hometown Mortgage Servs., Inc., 346 F.3d 1024, 1029-31 (11th Cir. 2003) (determining validity of severable limitations on remedies reserved for arbitrator); Doc. 33-19 at 24 (class waiver is not severable), 26 (severability provisions). 71 As amicus CTIA – The Wireless Association rightly points out, because FDUTPA applies only to certain consumer and commercial contracts, §§ 501.203-204, Fla. Stat. and not to contracts generally, neither it (nor its remedial purpose) presents a valid basis to void Pendergast’s individualized arbitration obligation under the FAA. See Credit Acceptance Corp. v. Davisson, 644 F. Supp. 2d at 959.

Br. at 58-60. In fact, Florida courts have repeatedly ruled

that class waivers do not frustrate the remedial purposes of FDUTPA. In Fonte v.

AT&T Wireless Services, the court examined FDUTPA’s text and legislative

history and determined that private class actions are unnecessary to fulfilling the

statute’s intended consumer protection aims. 903 So. 2d 1019 (Fla. 4th DCA

2005). As the Fonte court put it:

“[T]here exists a difference between the availability of the class action tool, and possessing a blanket right to use the tool under any circumstance. . . . An intent to create such a ‘blanket right,’ a non-waivable right, [must] be gleaned from the text and legislative history.” . . . . We find that neither the text nor our review of the legislative history of FDUTPA suggests that the legislature intended to confer a non-waivable right to class representation.

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Id. at 1024-25 (quoting Randolph v. Green Tree Fin. Corp.-Alabama, 244 F.3d

814, 817 (11th Cir. 2001)) (emphasis added).72 In fact, in enacting FDUTPA, the

Legislature specifically considered, but decided to reject, provisions explicitly

providing for class actions.73

Pendergast’s other arguments are meritless. He contends this Court should

follow the supposed holding in S.D.S. Autos, Inc. v. Chrzanowski, 976 So. 2d 600

(Fla. 1st DCA 2007) that class waivers always violate the remedial purposes of

FDUTPA. But the holding and reasoning of S.D.S. Autos are inapposite, because

they are expressly limited to a statute not at issue here.

This Court should not read into FDUTPA a non-

waivable right to pursue a class action that the Legislature considered but chose not

to create in the first place.

74

72 See Reuter v. Davis, 2006 WL 3743016, at *2 (finding no evidence of legislative intent to preclude class action waiver); Cruz v. Cingular Wireless, LLC, No. 2:07-CV-00714, 2008 WL 4279690, at *3 (M.D. Fla. Sept. 15, 2008) (same). 73 See FDUTPA Legislative History (Attachment A to letter to Clerk of the Eleventh Circuit from Michael Kovaka dated November 10, 2009). In contrast, the consumer protection statutes at issue in Feeney v. Dell, Inc., 908 N.E.2d 753, 759 (Mass. 2009) and Fiser v. Dell Computer Corp., 188 P.3d 1215, 1219 (N.M. 2008) specifically provided for class actions.

Moreover, unlike Fonte,

S.D.S. Autos ignored FDUTPA’s legislative history and surmised that because the

74 S.D.S. addressed claims for motor vehicle dealers’ violations of Fla. Stat. § 501.976. That statute contains a specific provision that, unlike FDUTPA as a whole, limits fees to those that are reasonable in light of an individual’s actual damages. Cert. Op. at 52. As the Eleventh Circuit recognized, the concern in S.D.S. is inapplicable here because “[t]he regular attorney’s fees provision of the

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Legislature was “necessarily aware” of the role of class actions, it must have

deemed them indispensable. 976 So. 2d at 610. This is precisely the type of

supposition Fonte rejects.75

Finally, Pendergast contends that the class arbitration waiver would bar him

from pursuing injunctive relief on behalf of a class under Florida Statute

§ 501.211(1). However, there is no indication that the Legislature intended this

procedure to be non-waivable, and the various enforcement procedures available to

Pendergast ensure that the Ts&Cs do not eliminate the availability of any relief.

Pendergast also asserts that the class waiver “frustrates FDUTPA because it

limits the broad declaratory and injunctive relief provided by Florida Statute

§ 501.211(1).” Br. at 59. This is simply false. Under the Ts&Cs, an arbitrator

“can award the same damages and relief [as a court], including any attorney’s fees,

authorized by law . . . .” Cert. Op. at 19; Doc. 33-19 at 22 (emphasis added). And

as the Eleventh Circuit found, Sprint’s Ts&Cs “do not bar declaratory or injunctive

relief under FDUTPA.” Cert. Op. at 47.

76

FDUTPA, Fla. Stat. § 501.2105, applies, which permits recovery of attorney’s fees and costs of any reasonable amount.” Cert. Op. at 52 (emphasis in original). 75 See Fonte, 903 So. 2d at 1025 (“We find that neither the text nor our review of the legislative history of FDUTPA suggests that the legislature intended to confer a non-waivable right to class representation.”).

76 Powertel is not to the contrary. Powertel observed that the arbitration agreement’s prohibition on punitive damages, injunctions and declaratory relief (not its class waiver) frustrated the remedial purposes of FDUTPA because it

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Pendergast retains his own ability to obtain any relief a court could grant, including

injunctive and declaratory relief, as the Eleventh Circuit found, and nothing

prevents Pendergast from bringing a claim to the Florida Attorney General to

pursue broad injunctive and declaratory relief on behalf of a class of consumers.77

WHEREFORE, Sprint respectfully requests that this Court find that, under

Florida law, a party challenging a contract as unconscionable has the burden to

Pendergast contends in a final footnote that the class waiver should be

voided because “Sprint provided no new consideration to its customers when it

added the class action ban on June 30, 2004.” Br. at 60 n.40. As the Eleventh

Circuit noted, Pendergast does not dispute that the “changes to agreement” clause

“was agreed to in the initial terms of Plaintiff’s contract (in 2001 and 2005) and

was fully supported by consideration at that time.” Cert. Op. at 49. In addition,

Sprint provided consideration for modifications by agreeing to provide (and

actually providing) wireless service to Pendergast, which he accepted.

CONCLUSION

“[did] not authorize the arbitrator to afford all of the same remedies” available in court. 743 So. 2d at 576-77. Holt v. O’Brien Imports, 862 So. 2d 87, 89 (Fla. 2d DCA 2003) is inapposite because the agreement barred injunctive relief entirely. 77 See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20, 32 (1991) (finding arbitration agreement enforceable where even in the absence of class procedures “it should be remembered that arbitration agreements will not preclude the [relevant government agency] from bringing actions seeking classwide and equitable relief”).

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prove both procedural and substantive unconscionability on an independent basis,

that Pendergast has demonstrated neither, and that there is no other legal basis

under Florida law to void the class waiver in his arbitration agreement.

May 11, 2010 Respectfully submitted,

Thomas R. Julin (FL Bar No. 325376) Hunton & Williams LLP 1111 Brickell Avenue, Suite 2500 Miami, Florida 33131 Tel.: (305) 810-2516 Fax: (305) 810-2460 tjulin@hunton.com

_________________________ David E. Mills (pro hac vice) Daniel D. Prichard (pro hac vice) Dow Lohnes PLLC 1200 New Hampshire Ave., NW, #800 Washington, D.C. 20036 Tel.: (202) 776-2000 Fax: (202) 776-2222 dmills@dowlohnes.com dprichard@dowlohnes.com

Counsel for Appellees/Respondents Sprint Solutions, Inc. and Sprint Spectrum, L.P.

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CERTIFICATE OF SERVICE

I certify that a copy of the foregoing Answer Brief of

Appellees/Respondents Sprint Solutions, Inc. and Sprint Spectrum, L.P. has

been served via electronic mail and U.S. mail on this 11th day of May 2010

upon the following:

Douglas F. Eaton William G. Wolk Homer Bonner The Four Seasons Tower 1441 Brickell Avenue Suite 1200 Miami, FL 33131 deaton@homerbonnerlaw.com wwolk@homerbonnerlaw.com Attorneys for Plaintiffs

James A. Kowalski Jr. Law Offices of James A. Kowalski, Jr., PL 12627 San Jose Blvd., Suite 203 Jacksonville, FL 32223 Kowalski.law@mac.com Attorney for Amicus Curiae, AARP

Julie Nepveu AARP Foundation Litigation Michael Schuster AARP 601 E Street, NW Washington, DC 20049 jnepveu@aarp.org mschuster@aarp.org Attorneys for Amicus Curiae, AARP

Bard D. Rockenbach Burlington & Rockenbach, P.A. Courthouse Commons, Suite 430 444 W. Railroad Ave. West Palm Beach, FL 33401 bdr@FLAppellateLaw.com Attorney for Amicus Curiae, Florida Justice Association

Lynn Drysdale Jacksonville Area Legal Aid, Inc. 126 West Adams Street Jacksonville, FL 32202 Lynn.drysdale@jaxlegalaid.org Attorney for Amicus Curiae, Jacksonville Area Legal Aid, Inc.

Brian W. Warwick Janet R. Varnell 20 La Grande Boulevard The Villages, FL 32159 bwwarwick@aol.com Attorneys for Amicus Curiae, National Association of Consumer Advocates

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Andrew G. McBride Wiley Rein LLP 1776 K Street NW Washington, DC 20006 amcbride@wileyrein.com Attorneys for Amicus Curiae, CTIA - The Wireless Assocation

David E. Mills

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CERTIFICATE OF FONT

I hereby certify that the foregoing Answer Brief of

Appellees/Respondents Sprint Solutions, Inc. and Sprint Spectrum, L.P. has

been prepared using 14 point Times New Roman font.

David E. Mills