Newton v. American Debt Services
The defendants/appellants in this case — Global Client Solutions and Rocky Mountain Bank & Trust — have appealed a district court order from February 2012 denying their motion to compel arbitration. The appeal involves the enforceability of an arbitration clause that the defendants imposed on their customers as conditions of obtaining debt reduction and credit repair services. The U.S. District Court for the Northern District of California held the clause unenforceable in its entirety on the ground that it is unconscionable under California law. Plaintiff/appellee Newton alleges that defendants violated federal and state consumer protection statutes in failing to deliver debt reduction services as promised. Public Justice is representing Newton in the appeal, urging the U.S. Court of Appeals for the Ninth Circuit to affirm the District Court’s order holding the arbitration clause unconscionable. In particular, Public Justice argues the clause is procedurally unconscionable because it was imposed in an oppressive manner under conditions of unfair surprise. Public Justice further argues that the clause is substantively unconscionable because it: (1) requires consumers to arbitrate their claims in a distant forum; (2) denies the consumer any say in the choice of the particular arbitrator who will decide the dispute; and (3) deprives consumers of important statutory rights and protections. Oral argument has not yet been set.