2009AP760 Cottonwood Financial, Ltd., v. Estes

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Consumer Protection
Arbitration; class actions

An arbitration provision that prohibits a consumer from proceeding as part of a class is substantively unconscionable.

"Like in Coady, the arbitration provision here explicitly prohibits a consumer from proceeding as part of a class. This is a 'significant factor' indicating the arbitration agreement is unconscionable. As we explained in Coady, the availability of class-wide relief is often the only effective means of vindicating consumer rights. Id., ¶48. And, absent a mechanism for class proceedings, many consumers are unlikely to realize they have been wronged because they do not know the defendant's conduct is illegal. Id. Finally, the prospect of class-wide relief provides an important deterrent effect on merchants subject to the Wisconsin Consumer Act. Id. Permitting predispute waivers of class proceedings would be contrary to the Act's purpose of protecting consumers from unfair practices. See Wis. Stat. § 421.102. We therefore conclude the arbitration provision is substantively unconscionable."

Reversed and Remanded.

Recommended for publication in the official reports.

2009AP760 Cottonwood Financial, Ltd., v. Estes

Dist. III, Pierce County, Wing, J., Hoover, J.

Attorneys: For Appellant: Crandall, Eric L., New Richmond; For Respondent: Dillon, Duffy, Janesville

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