No. 30,424 IN THE SUPREME COURT ROBERT FISER, INDIVIDUALLY, AND AS A REPRESENTATIVE OF A CLASS OF PERSONS WITHIN THE STATE OF NEW MEXICO,

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1 IN THE SUPREME COURT OF THE STATE OF NEW MEXICO No. 30,424 ROBERT FISER, INDIVIDUALLY, AND AS A REPRESENTATIVE OF A CLASS OF PERSONS WITHIN THE STATE OF NEW MEXICO, Plaintiff-Petitioner, vs. DELL COMPUTER CORPORATION, A/K/A DELL, INC., Defendant-Respondent. On Writ of Certiorari from the New Mexico Court of Appeals BRIEF OF AMICUS CURIAE PUBLIC JUSTICE IN SUPPORT OF PLAINTIFF-PETITIONER PUBLIC JUSTICE, P.C. F. Paul Bland, Jr. (admitted pro hac vice) Amy Radon (admitted pro hac vice) 1825 K Street, NW Suite 200 Washington, D.C Phone: (202) Rob Treinen 300 Central Ave. SW Suite 2000-E Albuquerque, NM Phone: (505) FEFERMAN & WARREN

2 TABLE OF CONTENTS Page(s) TABLE OF AUTHORITIES... ii INTRODUCTION...1 STATEMENT OF FACTS...3 ARGUMENT...5 I. THE STANDARD OF REVIEW IS DE NOVO...5 II. DELL S ARBITRATION CLAUSE IS UNCONSCIONABLE, AND THEREFORE UNENFORCEABLE, UNDER GENERAL PRINCIPLES OF NEW MEXICO CONTRACT LAW...6 A. Dell s Arbitration Clause is Substantively Unconscionable Because it Exculpates Dell From Wrongs Committed Against Consumers...8 B. Dell s Arbitration Clause is Substantively Unconscionable Because it is One-Sided...17 C. Dell s Arbitration Clause Is Procedurally Unconscionable...20 III. IV. BECAUSE THE CLASS-ACTION BAN CANNOT BE SEVERED FROM THE REMAINDER OF DELL S ARBITRATION CLAUSE, THE ENTIRE CLAUSE MUST BE STRICKEN...25 THE CHOICE-OF-LAW PROVISION IN DELL S TERMS AND CONDITIONS VIOLATES THE PUBLIC POLICY OF NEW MEXICO, AND IS THEREFORE UNENFORCEABLE...28 V. GENERAL PRINCIPLES OF NEW MEXICO CONTRACT LAW ARE NOT PREEMPTED BY THE FAA...33 CONCLUSION...35 i

3 TABLE OF AUTHORITIES Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 117 S. Ct (1997)...9, 10 Armendariz v. Foundation Health Psychcare Services, Inc., 6 P.3d 669 (Cal. 2000)...19 Arnold v. United Companies Lending Corp., 511 S.E.2d 854 (W. Va. 1998)...19 Ashlock v. Sunwest Bank of Roswell, N.A., 107 N.M. 100, 753 P.2d 346 (N.M. 1988)...33 Autonation USA Corp. v. Leroy, 105 S.W.3d 190 (Tex. App. 2003)...32 Brazil v. Dell, Inc., 2007 WL (N.D. Cal. Aug. 3, 2007)...31 Carnegie v. Household Int l, Inc., 376 F.3d 656 (7th Cir. 2004)...10 Coady v. Cross Country Bank, 299 Wis. 2d 420, 729 N.W.2d 732 (Wis. Ct. App. 2007)...12, 22, 24, 32 Cooper v. QC Fin. Serv., Inc., 2007 WL (D. Ariz. Mar. 30, 2007)...7, 13, 17, 34 Crow v. Capitol Bankers Life Ins. Co., 119 N.M. 452, 891 P.2d 1206 (N.M. 1995)...28 DeArmond v. Halliburton Energy Servs., Inc., 2003 NMCA 148, 134 N.M. 630, 81 P.3d 573 (N.M. Ct. App. 2003)...6 Demir v. Farmers Texas County Mutual Ins. Co., 2006 NMCA 091, 140 N.M. 162, 140 P.3d 1111 (N.M. Ct. App. 2006)...30 Discover Bank v. Superior Court (Boehr), 36 Cal. 4th 148, 113 P.3d 1100 (Cal. 2005).. passim Doctor s Associates, Inc. v. Casarotto, 517 U.S. 681, 116 S. Ct (1996)...6, 34 Doerhoff v. General Growth Properties, Inc., 2006 WL (W.D. Mo. Nov. 6, 2006)...13, 31, 32, 34 Drink, Inc. v. Martinez, 89 N.M. 662, 556 P.2d 348 (N.M. 1976)...23 Eagle v. Fred Martin Motor Co., 157 Ohio App. 3d 150, 809 N.E.2d 1161 (Ohio Ct. App. 2004)...15 Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 94 S. Ct (1974)...1, 10 F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250 (2d Cir. 1987)...16 ii

4 Fairfield Leasing Corp. v. Techni-Graphics, Inc., 256 N.J. Super. 538, 607 A.2d 703 (N.J. Super. 1992)...24 Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, (9th Cir. 2002)...19 Fiser v. Dell Computer Corp., No. 25,862, slip op. (N.M. Ct. App. Apr. 30, 2007)... passim Gentry v. Superior Court, 64 Cal. Rptr. 3d 773, 165 P.3d 556 (Cal. 2007)...15 Green Tree Financial Corp. v. Bazzle, 539 U.S. 444, 123 S. Ct (2003)...27 Guthmann v. La Vida Llena, 103 N.M. 506, 709 P.2d 675 (N.M. 1985)...7, 8, 20 Hensley v. Eckerhart, 461 U.S. 424, 103 S. Ct (1983)...16 In re AdvancePCS Health L.P., 48 Tex. Super. Ct. J. 584, 172 S.W.3d 603 (Tex. 2005)...32 Ingle v. Circuit City Stores, 328 F.3d 1165 (9th Cir. 2003)...22 Iwen v. U.S. West Direct, 977 P.2d 989 (Mont. 1999)...19 James v. Thermal Master, Inc., 55 Ohio App. 3d 51, 562 N.E.2d 917 (Ohio Ct. App. 1988).. 16 Kinkel v. Cingular Wireless, LLC, 223 Ill. 2d 1, 857 N.E.2d 250 (Ill. 2006)...14, 21, 23, 34 Klussman v. Cross Country Bank, 134 Cal. App. 4th 1283, 36 Cal. Rptr. 3d 728 (Cal. Ct. App. 2005) Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir. 2006)...9, 15, 16 Lockman v. J.K. Harris & Co. LLC, 2007 WL (W.D. Ky. Mar. 6, 2007) Lohman v. Daimler-Chrysler Corp., 2007 WL (N.M. Ct. App. Mar. 15, 2007)...33 Loucks v. Standard Oil Co. of New York, 224 N.Y. 99, 120 N.E. 198 (N.Y. 1918)...28 Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp. 2d 1087 (W.D. Mich. 2000)...14 Luna v. Household Fin. Corp., III, 236 F. Supp. 2d 1166 (W.D. Wash. 2002)...14 Monette v. Tinsley, 1999 NMCA 040, 126 N.M. 748, 975 P.2d 361 (N.M. Ct. App. 1999)...8, 20 iii

5 Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1, 912 A.2d 88 (N.J. 2006)...15, 16, 23, 34 Nagrampa v. MailCoups, Inc., 469 F.3d 1257 (9th Cir. 2006)...22 Oestreicher v. Alienware Corp., 2007 WL (N.D. Cal. Aug. 10, 2007)...31 Padilla v. State Farm Mutual Automobile Ins. Co., 2003 NMSC 011, 133 N.M. 661, 68 P.3d 901 (N.M. 2003)... passim Palm Beach Motor Cars Ltd., Inc. v. Jeffries, 885 So.2d 990 (Fla. Dist. Ct. App. 2004)...19 Perry v. Thomas, 482 U.S. 483, 107 S. Ct (1987)...6 Pina v. Gruy Petroleum Mgmt. Co., 2006 NMCA 063, 139 N.M. 619, 136 P.3d 1029 (N.M. Ct. App. 2006)...29 Powertel, Inc. v. Bexley, 743 So.2d 570 (Fla. Dist. Ct. App. 1999)...14 Reagan v. McGee Drilling Corp., 1997 NMCA 014, 123 N.M. 68, 933 P.2d 867 (N.M. Ct. App. 1997)...28 Reuter v. Davis, 2006 WL (Fla. Cir. Ct. Dec. 12, 2006)...14 Richards v. Allianz Life Ins. Co. of North America, 2003 NMCA 001, 133 N.M. 229, 62 P.3d 320 (N.M. Ct. App. 2002)...5 Romero v. Phillip Morris, Inc., 2005 NMCA 035, 137 N.M. 229, 109 P.3d 768 (N.M. Ct. App. 2005)...10 Sandoval v. Valdez, 91 N.M. 705, 580 P.2d 131 (N.M. Ct. App. 1978)...28, 30 Santa Fe Technologies, Inc. v. Argus Networks, Inc., 2002 NMCA 030, 131 N.M. 772, 42 P.3d 1221 (N.M. Ct. App. 2001)...6 Schwartz v. Alltel Corp., 2006 WL (Ohio Ct. App. Jun. 29, 2006)...21, 23 Scott v. Cingular Wireless, 160 Wash. 2d 843, 161 P.3d 1000 (Wash. 2007)... passim Shaw v. Kuhnel & Assocs., Inc., 102 N.M. 607, 698 P.2d 880 (N.M. 1985)...5 Shroyer v. New Cingular Wireless Services, Inc., 2007 WL (9th Cir. Aug. 17, 2007)...13, 21, 22 iv

6 Simpson v. MSA of Myrtle Beach, Inc., 373 S.C. 14, 644 S.E.2d 663 (S.C. 2007)...24 Sisneros v. Citadel Broadcasting Co., 2006 NMCA 102, 140 N.M. 266, 142 P.3d 34 (N.M. Ct. App. 2006)...5 Skirchak v. Dynamics Research Corp., 432 F. Supp. 2d 175 (D. Mass. 2006)...13, 23, 24 State ex rel. Dunlap v. Berger, 211 W. Va. 549, 567 S.E.2d 265 (W. Va. 2002)...15 State ex rel. State Highway & Transp. Dep t v. Garley, 111 N.M. 383, 806 P.2d 32 (N.M. 1991)...7, 20, 23, 25 State ex rel. Stratton v. Gurley Motor Co., 105 N.M. 803, 737 P.2d 1180 (N.M. Ct. App.1987)...33 State ex rel. Udall v. Colonial Penn Ins. Co., 112 N.M. 123, 812 P.2d 777 (N.M. 1991) State Farm Mutual Auto Insurance Company v. Ballard, 2002 NMSC 030, 132 N.M. 696, 54 P.3d 537 (N.M. 2002) Stevens/Leinweber/Sullens, Inc. v. Holm Development and Mgmt., Inc., 795 P.2d 1308 (Ariz. App. 1990) Stevenson v. Louis Dreyfus Corp., 112 N.M. 97, 811 P.2d 1308 (N.M. 1991)... 11, 17, 33 Szetela v. Discover Bank, 97 Cal. App. 4th 1094, 118 Cal. Rptr. 2d 862 (Cal. App. 2002)... 9 Tamayo v. Brainstorm USA, 2005 WL (9th Cir. Sept. 21, 2005) Taylor v. Butler, 142 S.W.3d 277 (Tenn. 2004) Terrazas v. Garland & Loman, Inc., 2006 NMCA 111, 140 N.M. 293, 142 P.3d 374 (N.M. Ct. App. 2006)... 5 Thibodeau v. Comcast Corp., 912 A.2d 874 (Pa. Super. Ct. 2006) Thompson v. THI of New Mexico at Casa Arena Blanca, LLC, 2006 WL (D. N.M. Sept. 12, 2006)... 7, 20 Ticknor v. Choice Hotels, Inc., 265 F.3d 931 (9th Cir. 2001) Ting v. AT&T, 182 F. Supp. 2d 902 (N.D. Cal. 2002), aff d 319 F.3d 1126 (9th Cir. 2003)... 9, 13 v

7 Trinidad Indust. Bank v. Romero, 81 N.M. 291, 466 P.2d 568 (N.M. 1970) Tucker v. R.A. Hanson Co., Inc., 956 F.2d 215 (10th Cir. 1992) United Wholesale Liquor Co. v. Brown-Forman Distillers Corp., 108 N.M. 467, 775 P.2d 233 (N.M. 1987)... 28, 32 Vasquez-Lopez v. Beneficial Oregon, Inc., 210 Or. App. 553, 152 P.3d 940 (Or. Ct. App. 2007)... 7, 12 Whitney v. Alltel Communications, Inc., 173 S.W.3d 300 (Mo. Ct. App. 2005)...14, Williams v. Aetna Fin. Co., 700 N.E.2d 859 (Ohio 1998) Wisconsin Auto Title Loans, Inc. v. Jones, 280 Wis. 2d 514, 714 N.W.2d 155 (Wis. 2006) Worldwide Ins. Group v. Klopp, 603 A.2d 788 (Del. 1992) Statutes: Federal Arbitration Act, 9 U.S.C , 33 New Mexico s Unfair Practices Act, et. seq....passim Other Authorities: Do an LRA: Implement Your Own Civil Justice Reform Program NOW, METROPOLITAN CORPORATE COUNSEL, NORTHEAST EDITION (Aug. 2001) Pamela MacLean, Class Action Waivers Hit a Wall, NATIONAL LAW JOURNAL (Aug. 27, 2007)... 2, 8 Restatement (Second) of Contracts 208 (1979) Restatement (Second) of Conflict of Laws 187 (1971) vi

8 INTRODUCTION This case involves the enforceability of a mandatory arbitration clause that the defendant, Dell Computer Corporation ( Dell ), has included in its standard consumer contracts. However, this case is not actually about arbitration. It s about whether a corporation can prohibit its customers from taking part in a class action (in arbitration or in court) when the particular circumstances of the case dictate that the case proceed as a class action[] or not at all, Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 161, 94 S. Ct. 2140, 2144 (1974). This important issue is one of first impression in New Mexico, and this Court s decision is likely to have enormous ramifications on the future of consumer protection laws in this state. As this amicus brief will explain, Dell has devised an arbitration clause that makes it effectively impossible for consumers to bring legal actions against it for violations of law where only small damages to the individual consumer are at stake. Generally-applicable principles of New Mexico state law governing the unconscionability and public policy of contracts forbid Dell from exculpating itself in this manner, and this Court should refuse to permit Dell from escaping liability for the wrongs it has committed against New Mexico consumers. This brief will first explain that Dell s arbitration clause should not be enforced because it effectively exculpates Dell from liability for violating New Mexico consumer protection statutes, and is thus substantively unconscionable. Dell s arbitration clause is therefore indistinguishable from those that have been struck down as unconscionable by myriad courts across the United States, including the U.S. Court of Appeals for the Ninth Circuit, federal courts applying the law of Arizona, California, Florida, Massachusetts, Michigan, Missouri, and Washington, state high courts in Alabama, California, New Jersey, Illinois, Washington, and West Virginia, as well as 1

9 state appellate courts in Florida, Missouri, Ohio, Oregon, Pennsylvania, and Wisconsin. As evidence of a strong trend in the law, a majority of these decisions have been handed down in the last eighteen months. See generally Pamela MacLean, Class Action Waivers Hit a Wall, NATIONAL LAW JOURNAL (Aug. 27, 2007) (noting the definite trend of courts striking class action bans as unconscionable). Second, this brief will provide an additional basis upon which this Court should find Dell s arbitration clause substantively unconscionable: the fact that it impermissibly obligates only Dell s customers, but not Dell, to arbitrate claims involving the sale of Dell computers. This clause is even more one-sided and unfair than the arbitration clause that this Court held to violate public policy in Padilla v. State Farm Mutual Automobile Ins. Co., 2003 NMSC 011, 133 N.M. 661, 68 P.3d 901 (N.M. 2003), and should likewise be held unenforceable. Third, although a finding of substantive unconscionability is reason alone for this Court to refuse to enforce Dell s arbitration clause, this amicus brief will also explain that Dell s clause is procedurally unconscionable, thus further bolstering the case for holding Dell s arbitration clause unenforceable. Dell imposed its arbitration clause on consumers in a manner that deprived them of any meaningful opportunity to understand its meaning or to negotiate over the inclusion of this clause as a condition of their purchase. Regardless of whether this Court decides to invalidate Dell s arbitration clause based on a finding of substantive unconscionability alone, or both procedural and substantive unconscionability, this brief will further explain that the clause should be invalidated in its entirety, because the unconscionable provisions of the clause cannot be severed from the remainder of the clause. Fourth, although Dell has included a choice-of-law provision in its terms and conditions of 2

10 sale, which designates the laws of the State of Texas to govern all disputes, this brief will demonstrate why this provision should not excuse Dell s use of an effectively exculpatory clause. Fundamental consumer protection policies that are embodied in New Mexico s Unfair Practices Act conclusively resolve the choice-of-law issue in favor of the plaintiff, because to the extent that Texas law would permit Dell to impose a class action ban on its customers, enforcing Dell s choice-of-law clause would violate the public policy of this State. And finally, this brief will explain how nothing in the Federal Arbitration Act preempts the plaintiff s state law unconscionability arguments. For all of these reasons, this Court should strike Dell s arbitration clause and permit the class litigation to proceed in court. STATEMENT OF FACTS The plaintiff, Robert Fiser, filed a class action lawsuit against Dell on July 8, 2004, alleging that Dell s website contained misrepresentations and omissions regarding the amount of memory, or storage capacity, in its computers. Fiser v. Dell Computer Corp., No. 25,862, slip op. at 1 (N.M. Ct. App. Apr. 30, 2007) (hereinafter slip op. ). The class action complaint stated claims for relief arising from violations of New Mexico s Unfair Practices Act ( UPA ), NMSA et. seq., False Advertising Act, and Uniform Commercial Code ( UCC ), as well as a number of common law claims. (Appellant s Br. In Chief, No. 30,424 at 1) (hereinafter Appellant s Br. ). Dell moved to stay the district court action and compel individual arbitration of the plaintiff s claims, citing an arbitration clause that was contained in the written terms and conditions that accompanied the plaintiff s purchase. Slip op. at 1. The arbitration clause required every consumer claim against Dell to be arbitrated by the National Arbitration Forum. 3

11 Id. at 7. Notably, the terms and conditions did not require Dell to arbitrate any of its claims against consumers. Id. The terms and conditions also contained a choice-of-law provision, which designated the laws of the State of Texas to govern all disputes. Id. at 3. Subsequent versions of Dell s terms and conditions stated that neither Dell nor Dell s customers may JOIN OR CONSOLIDATE CLAIMS... AS A REPRESENTATIVE OR CLASS ACTION OR IN A PRIVATE ATTORNEY GENERAL CAPACITY. Appellant s Br. at 2 (emphasis in original). According to Dell, an individual who purchased a Dell computer was provided with these terms and conditions on three different occasions. Slip op. at 1. First, the terms and conditions could be accessed by clicking on a hyperlink on Dell s website. Id. Second, the confirmation and acknowledgment of purchase that were ed to each of Dell s customers at the time of purchase likewise contained a hyperlink to the terms and conditions. Id. 1 Finally, Dell printed the terms and conditions on the reverse side of a packing slip that was included with the shipment of the computer. Slip op. at 1. Over the plaintiff s objections that Dell s arbitration clause was unenforceable because, inter alia, it was both substantively and procedurally unconscionable, the Court of Appeals held that Texas law compelled a finding that the plaintiff s individual claims only should proceed in arbitration. Slip op. at 26. The plaintiff filed a Petition for a Writ of Certiorari, which this Court granted on June 26, 2007, contending that, inter alia, the Court of Appeals erroneously applied Texas law to reach a holding that Dell s arbitration clause was enforceable. (Plaintiff s Pet. for Writ of Cert. at 1, May 18, 2007.) Public Justice, a national public interest law firm with an extensive consumer rights 1 It should be noted, however, that the plaintiff here failed to receive the terms and conditions via , because a spam filter on his program prevented the from reaching his inbox. Appellant s Br. at 4. 4

12 practice, 2 now joins this appeal as amicus curiae to address the issue of whether Dell s arbitration clause is unconscionable, and therefore unenforceable. As this brief will explain, Dell s arbitration clause is both substantively and procedurally unconscionable, and Texas law should not be applied to reach an alternative result because doing so would violate fundamental public policy of this State. Public Justice therefore respectfully urges this Court to refuse to enforce Dell s arbitration clause. ARGUMENT I. THE STANDARD OF REVIEW IS DE NOVO. It is well-established that this Court, and not an arbitrator, must resolve challenges to the validity of an arbitration clause. Richards v. Allianz Life Ins. Co. of North America, 2003 NMCA 001, 133 N.M. 229, 232, 62 P.3d 320, 323 (N.M. Ct. App. 2002) (citing Shaw v. Kuhnel & Assocs., Inc., 102 N.M. 607, 609, 698 P.2d 880, 882 (N.M. 1985)). The lower court s order compelling arbitration is reviewed de novo, see Sisneros v. Citadel Broadcasting Co., 2006 NMCA 102, 140 N.M. 266, 270, 142 P.3d 34, 38 (N.M. Ct. App. 2006), as is the lower court s determination of the enforceability of a choice-of-law provision. See Terrazas v. Garland & Loman, Inc., 2006 NMCA 111, 140 N.M. 293, 296, 142 P.3d 374, 377 (N.M. Ct. App. 2006). 2 Public Justice (formerly Trial Lawyers for Public Justice) fights for justice on behalf of consumers through precedent-setting and socially significant individual and class action litigation. Public Justice s Class Action Preservation Project and Mandatory Arbitration Abuse Prevention Project have been notably successful in preventing corporate defendants from escaping liability by imposing one-sided or exculpatory arbitration clauses on unsuspecting consumers. 5

13 II. DELL S ARBITRATION CLAUSE IS UNCONSCIONABLE, AND THEREFORE UNENFORCEABLE, UNDER GENERAL PRINCIPLES OF NEW MEXICO CONTRACT LAW. Dell s arbitration clause should not be enforced because general principles of New Mexico contract law compel a finding that the clause is both substantively and procedurally unconscionable. Although only a finding of substantive unconscionability is required to strike the clause, here the clause is procedurally unconscionable as well, thus adding further support for the proposition that Dell s arbitration clause should not be enforced. The Federal Arbitration Act ( FAA ), 9 U.S.C. 2, states that arbitration clauses are valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. This provision of the FAA has been interpreted to mean that state law, whether of legislative or judicial origin, may be applied to invalidate arbitration clauses if that law arose to govern issues concerning the validity, revocability, and enforceability of contracts generally. Perry v. Thomas, 482 U.S. 483, 492 n.9, 107 S. Ct. 2520, 2527 n.9 (1987) (emphasis in original); DeArmond v. Halliburton Energy Servs., Inc., 2003 NMCA 148, 134 N.M. 630, 634, 81 P.3d 573, 577 (N.M. Ct. App. 2003) (noting that New Mexico contract law governs the validity of arbitration agreements); Santa Fe Technologies, Inc. v. Argus Networks, Inc., 2002 NMCA 030, 131 N.M. 772, 788, 42 P.3d 1221, 1238 (N.M. Ct. App. 2001) (same). The U.S. Supreme Court has stated that state contract law of unconscionability in particular may be applied to invalidate arbitration agreements without contravening the FAA. Doctor s Associates, Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 1656 (1996). Thus, Dell s arbitration clause should not be enforced if it is found to be unconscionable under general principles of New Mexico contract law. 6

14 The law of unconscionability in New Mexico is best summarized as follows: a contract will be held to be unconscionable when there is an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonable favorable to the other party. Guthmann v. La Vida Llena, 103 N.M. 506, 510, 709 P.2d 675, 679 (N.M. 1985). New Mexico courts have recognized two types of unconscionability: substantive and procedural. Id. Substantive unconscionability concerns the legality and fairness of the contract terms themselves, while procedural unconscionability focuses on the manner in which the parties entered into the contract. Id. Under New Mexico law, a contract term may be held unconscionable based on a finding of substantive unconscionability alone. Thompson v. THI of New Mexico at Casa Arena Blanca, LLC, 2006 WL , at *9 (D. N.M. Sept. 12, 2006). As such, this Court has frequently analyzed and invalidated contract provisions solely in terms of substantive unconscionability. State ex rel. State Highway & Transp. Dep t v. Garley, 111 N.M. 383, 389, 806 P.2d 32, 38 (N.M. 1991) (noting that this Court has generally embraced the doctrine of substantive unconscionability to invalidate unconscionable contract terms); see, e.g., Padilla, 2003 NMSC 011, 133 N.M. at 667, 68 P.3d at 907 (finding a provision in an insurance contract void as substantively unconscionable ). 3 In this case, the fact that Dell s arbitration clause is substantively unconscionable alone compels a finding that the clause should not be enforced. However, this brief will establish not 3 Other courts have likewise held that substantive unconscionability alone is sufficient to support a finding of unconscionability. See, e.g., Cooper v. QC Fin. Serv., Inc., 2007 WL , at *10 (D. Ariz. Mar. 30, 2007) (stating that, in Arizona, a claim of unconscionability can be established with a showing of substantive unconscionability alone, especially in cases involving... limitation of remedies ) (citation omitted); Vasquez-Lopez v. Beneficial Oregon, Inc., 210 Or. App. 553, 567, 152 P.3d 940, 948 (Or. Ct. App. 2007) (noting that, under Oregon law, only substantive unconscionability is absolutely necessary ); Scott v. Cingular Wireless, 160 Wash. 2d 843, 854 n.4, 161 P.3d 1000, 1006 n.4 (Wash. 2007) (finding it unnecessary to address plaintiffs claims of procedural unconscionability after holding the that defendant s class action ban was substantively unconscionable). 7

15 only that Dell s clause is substantively unconscionable, but that it is procedurally unconscionable as well, thus providing ample reason for this Court to strike the clause as unenforceable. A. Dell s Arbitration Clause is Substantively Unconscionable Because it Exculpates Dell From Wrongs Committed Against Consumers. Although not exculpatory on its face, Dell s arbitration clause effectively eliminates its customers ability to seek redress for any small-value claims they may have involving the purchase of their computers. Although this issue is one of first impression in New Mexico, a growing number of courts in other jurisdictions have refused to enforce similar arbitration clauses based on principles of substantive unconscionability that are substantially equivalent to New Mexico law, which regards contract terms to be substantively unconscionable when they are contrary to public policy, or grossly unfair, Guthmann, 103 N.M. at 510, 709 P.2d at 679, or when they unreasonably favor the drafter of the contract at the expense of consumers. See Monette v. Tinsley, 1999 NMCA 040, 126 N.M. 748, 752, 975 P.2d 361, 365 (N.M. Ct. App. 1999). This Court should therefore join the growing number of courts across the nation that have recognized the exculpatory nature of arbitration clauses that contain class action bans, and have refused to enforce these clauses on the ground that they are unconscionable. See MacLean, supra pp. 1-2 (noting that the pendulum has begun swinging favorably toward consumers, with courts striking down class action waiver terms as unconscionable and refusing to compel arbitration ). At first glance, an arbitration clause that prohibits consumers from bringing or joining in a class action against a corporate defendant seems to effectuate little more than the channel[ing] [of] dispute resolution into individual arbitration proceedings.... Scott, 160 Wash. 2d at 855, 8

16 161 P.3d at Yet nothing could be further from the truth. 4 In cases where the amount in controversy is relatively small, but the wrongs committed by the corporate defendant are widespread, a class action is the only effective way to halt and redress [the] exploitation of consumers. Discover Bank v. Superior Court (Boehr), 36 Cal. 4th 148, 161, 113 P.3d 1100, (Cal. 2005) (emphasis added); see also Scott, 160 Wash. 2d at 855, 161 P.3d at 1007 (noting that the class action mechanism is often the only meaningful type of redress available for small but widespread injuries ) (emphasis added). Thus, when a corporate defendant includes a provision in the arbitration clause of its standard consumers contracts that prohibits consumers from bringing or joining in a class action against it, the result is a get out of jail free card. Szetela v. Discover Bank, 97 Cal. App. 4th 1094, 1101, 118 Cal. Rptr. 2d 862, 868 (Cal. App. 2002). The U.S. Supreme Court succinctly explained why this is so: The policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone s (usually an attorney s) labor. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617, 117 S. Ct. 2231, 2246 (1997) (citation and quotation omitted). It is now well-established that the class action mechanism is essential to the vindication of 4 In assessing the unconscionability of class action bans that have been embedded in arbitration clauses, courts look past formalities to the actual real world effects of such terms. See, e.g., Kristian v. Comcast Corp., 446 F.3d 25, 54 (1st Cir. 2006) (noting that, although the class action device is procedural and not formally substantive, a court should refuse to ignore the substantive implications of this procedural mechanism. ); Ting v. AT&T, 319 F.3d 1126, 1149 n.14 (9th Cir. 2003) (directing courts to look beyond the facial neutrality and examine the actual effects of arbitration clauses, and criticizing a case that ignore[d] the obvious practical implications of the arbitration provision ); Discover Bank, 36 Cal. 4th at 161, 113 P.3d at 1109 ( [C]lass actions and arbitrations are, particularly in the consumer context, often inextricably linked to the vindication of substantive rights. Affixing the procedural label on such devices understates their importance and is not helpful to resolving the unconscionability issue. ). 9

17 consumer rights where individual small-value claims are concerned. See Eisen, 417 U.S. at 161, 94 S. Ct. at 2144 (finding that, because the amount in controversy was only $70, [n]o competent attorney would undertake this complex antitrust action to recover so inconsequential an amount ); Romero v. Phillip Morris, Inc., 2005 NMCA 035, 137 N.M. 229, 238, 109 P.3d 768, 777 (N.M. Ct. App. 2005) (noting that class actions play a significant role in obtaining remedies for small claim holders and that a dominant policy behind the class action procedure is the vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court at all ) (quoting Amchem, 521 U.S. at 617, 117 S. Ct. at 2246); Scott, 160 Wash. 2d at 855, 161 P.3d. at 1007 (noting that [t]he realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30 ) (quoting Carnegie v. Household Int l, Inc., 376 F.3d 656, 661 (7th Cir. 2004)) (emphasis in original). Thus, the problem with Dell s arbitration clause, like myriad others before it that were found substantively unconscionable (and thus unenforceable), is not that it designates arbitration as the forum for dispute resolution. Rather, the clause is objectionable because it requires the plaintiff to vindicate his rights on an individual basis when it is simply impossible for him and others similarly situated to do so. Such was the finding by the Supreme Court of Washington in Scott v. Cingular Wireless, 160 Wash. 2d at 847, 161 P.3d at The plaintiff in that case filed a class action complaint to hold the defendant liable for overcharging its customers an amount that ranged from $1 to $45 per month on their cell phone bills. Id. at 847, 161 P.3d at The defendant, however, argued that a provision in its cell phone service contract that required the individual arbitration of its 10

18 customers claims prohibited the class action suit from going forward. Id. at 847, 161 P.3d at The court found that this provision effectively exculpate[d] Cingular from liability for a whole class of wrongful conduct, including violations of Washington s Consumer Protection Act, which was designed to protect consumers from unfair and deceptive acts and practices in commerce. Id. at 847, 853, 161 P.3d at 1003, In reaching this finding, the court noted a declaration from a former division chief for consumer protection in the Washington attorney general s office, which provided that the attorney general s office did not have sufficient resources to respond to many individual cases and often relied on private class action to correct the deceptive or unfair industry practice and to reimburse consumers for their losses. Id. at 849, 161 P.3d at The court also cited a declaration from a private practice attorney who specialized in consumer law, which stated that it [was] very unlikely that any consumer attorney would agree to represent the plaintiff without the prospect that his claims could proceed on a class-wide basis, because the claims against the defendant were too small and too complex factually and legally to be adjudicated separately. Id. at 849, 161 P.3d at Indeed, the court noted that no claims from Washington customers [had] been brought to arbitration against Cingular in the past six years. Id. at 856, 161 P.3d at The court therefore held the defendant s arbitration clause to be substantively unconscionable, due to the fact that the class action ban embedded in that clause function[ed] to exculpate the drafter from liability for a broad range of undefined wrongful conduct, including potentially intentional wrongful conduct.. 5 By exculpating the defendant from liability to consumers for violating Washington s consumer protection laws, the court noted that the class arbitration waiver undermines the legislature s intent that individual consumers act as private attorneys general.... Id. at Similarly, New Mexico s Unfair Practices Act was designed to provide[] a private remedy to persons likely to suffer pecuniary harm for conduct involving either misleading identification of business or goods or false and deceptive advertising. Stevenson v. Louis Dreyfus Corp., 112 N.M. 97, 100, 811 P.2d 1308, 1311 (N.M. 1991). 11

19 .. Id. at 857, 161 P.3d at Likewise, an Oregon appellate court held a class action ban unconscionable after finding that it gave the defendant a virtual license to commit, with impunity, millions of dollars worth of small-scale fraud. Vasquez-Lopez, 210 Or. App. at 572, 152 P.3d at 951. In so holding, the court stated that it was simply unconvinced that any significant number of plaintiffs with claims of under, say, $50.00, would be sufficiently motivated to spend the time and risk the expense necessary to take the claim to arbitration. Id. at 571, 152 P.3d at 951. The court thus espoused the now well-established principle that the opportunity that the class action ban denied to borrowers is, in many instances, a crucial one, without which many meritorious claims would simply not be filed. Id. at 570, 152 P.3d at 950. A Wisconsin appellate court echoed these sentiments, when it held that in cases where the damages involved are comparatively small for each individual consumer, class actions are often the only means of vindicating consumer rights. Coady v. Cross Country Bank, 299 Wis. 2d 420, , 729 N.W.2d 732, 747 (Wis. Ct. App. 2007). Here, the plaintiffs sought to hold the defendant credit card company liable for engaging in illegal debt collection practices in violation of the Wisconsin Consumer Act. Id. at 427, 729 N.W.2d at 735. The court held that the defendant s arbitration clause was substantively unconscionable because the class action ban embedded in that clause unduly restrict[ed] [the plaintiffs ] remedies and [was] unreasonably favorable to [the defendant]. Id. at 452, 729 N.W.2d at 748. The court also noted that, without the availability of class action mechanism where small-value consumer claims are concerned, many consumers may never realize that they have been wronged and the deterrent effect on corporate wrongdoing provided by the prospect of class-wide relief is eviscerated. Id. at 452, 12

20 729 N.W.2d at 747; see also Cooper, 2007 WL , at *18 (noting that [i]ndividualizing each claim absolutely and completely insulates and immunizes Defendant from scrutiny and accountability for its business practices and also serves as a disincentive for [Defendant]... to avoid the type of conduct that might lead to class action litigation in the first place ) (alterations in original). These courts are just a few of many that have refused to enforce arbitration clauses that prohibit consumers from vindicating their rights on a class action basis on the ground that these clauses are unconscionable. See, e.g., Shroyer v. New Cingular Wireless Services, Inc., 2007 WL , at *6 (9th Cir. Aug. 17, 2007) (holding a class arbitration waiver unconscionable, because the plaintiffs would not be able to effectively bring individual claims for damages in the hundreds of dollars ); Skirchak v. Dynamics Research Corp., 432 F. Supp. 2d 175, 181 (D. Mass. 2006) (holding a class action waiver in an employment contract to be substantively unconscionable, because it may effectively prevent [] employees from seeking redress of [statutory] violations and removes any incentive for [the employer] to avoid the type of conduct that might lead to class litigation in the first instance ); Doerhoff v. General Growth Properties, Inc., 2006 WL , at *6 (W.D. Mo. Nov. 6, 2006) (finding an arbitration clause that force[d] customers to individually arbitrate claims that only amount to a few dollars and pay the accompanying fees was unconscionable, because [f]ew plaintiffs would likely undertake such a scheme if not allowed to join in a class action ); Ting v. AT&T, 182 F. Supp. 2d 902, 931 (N.D. Cal. 2002), aff d with respect to unconscionability, 319 F.3d 1126 (9th Cir. 2003) (finding that the prohibition on class action litigation functions as an effective deterrent to litigating many types of claims involving rates, services or billing practices and, ultimately... [serves] to shield 13

21 AT&T from liability even in cases where it has violated the law ); Luna v. Household Fin. Corp., III, 236 F. Supp. 2d 1166, (W.D. Wash. 2002) (finding an arbitration clause substantively unconscionable where it prohibited class actions, as this would prevent borrowers from effectively vindicating their rights for certain categories of claims ); Lozada v. Dale Baker Oldsmobile, Inc., 91 F. Supp. 2d 1087, 1105 (W.D. Mich. 2000) (holding the defendant s arbitration clause to be substantively unconscionable because it prohibited the pursuit of classwide relief, and thus impermissibly waived consumer remedies under the Truth in Lending Act and Michigan s Consumer Protection Act); Discover Bank, 36 Cal. 4th at 163, 113 P.3d at 1110 (holding unconscionable a class action waiver because it deliberately cheat[ed] large numbers of consumers out of individually small sums of money ); Powertel, Inc. v. Bexley, 743 So.2d 570, 576 (Fla. Dist. Ct. App. 1999) (noting that a corporate defendant s class action ban precluded the possibility that a group of its customers might join together to seek relief that would be impractical for any of them to obtain alone ); Reuter v. Davis, 2006 WL , at *4 (Fla. Cir. Ct. Dec. 12, 2006) (finding the defendant s class action ban to be unconscionable because it would be virtually impossible for Ms. Reuter, or anyone in a similar position, to obtain competent individual representation ); Kinkel v. Cingular Wireless, LLC, 223 Ill. 2d 1, 42, 857 N.E.2d 250, 275 (Ill. 2006) (noting that the defendant s class action ban created a situation where the cost of vindicating the claim is so high that the plaintiff s only reasonable, cost-effective means of obtaining a complete remedy is as either the representative or member of a class ); Whitney v. Alltel Communications, Inc., 173 S.W.3d 300, 309 (Mo. Ct. App. 2005) (striking a class action ban as unconscionable because the individual claims would not be economically feasible to prosecute and the class action ban would leave consumers with relatively small claims without 14

22 a practical remedy ); Muhammad v. County Bank of Rehoboth Beach, Delaware, 189 N.J. 1, 21, 912 A.2d 88, 100 (N.J. 2006) (holding a class arbitration ban substantively unconscionable; finding that defendant corporation cannot take action that impedes ordinary citizens access to representation to vindicate their rights ); Eagle v. Fred Martin Motor Co., 157 Ohio App. 3d 150, 178, 809 N.E.2d 1161, 1183 (Ohio Ct. App. 2004) (noting that the elimination of a consumer s right to proceed through a class action or as a private attorney general in arbitration... directly hinders the consumer protection purposes of the Ohio Consumer Protection Act); Thibodeau v. Comcast Corp., 912 A.2d 874, 886 (Pa. Super. Ct. 2006) (finding the defendant s arbitration clause unconscionable, because, if enforced, the defendant would be immunized from the challenges brought by [the plaintiff], brought by any class member, or effectively from any minor consumer claims ) (citation omitted); State ex rel. Dunlap v. Berger, 211 W. Va. 549, , 567 S.E.2d 265, (W. Va. 2002) (noting that class action bans permit those who commit illegal activity to go unpunished, undeterred, and unaccountable ); cf. Kristian, 446 F.3d at 29 (holding that contract provisions barring class arbitration are invalid because they prevent the vindication of statutory rights ); Gentry v. Superior Court, 64 Cal. Rptr. 3d 773, 788, 165 P.3d 556, 571 (Cal. 2007) (holding that class arbitration waivers cannot... be used to weaken or undermine the private enforcement of overtime pay legislation by placing formidable practical obstacles in the way of employees prosecution of those claims ). Dell s arbitration clause effectuates the same result as those clauses that have been held substantively unconscionable time and time again by courts across the nation: it eliminates consumers ability to vindicate their rights and insulates the corporate wrongdoer from liability for its actions. It should be noted that the availability of attorneys fees under New Mexico s 15

23 UPA, N.M.S.A (C) (1978), does not render Dell s arbitration clause any less exculpatory. A lawyer considering whether to take a very small individual consumer case must be very conscious of the fact that, although a proper interpretation of the UPA would provide for fees in such cases, the experience of many consumer lawyers is that too often individual judges are reluctant to grant significant fees in cases involving small sums of money. See, e.g., Hensley v. Eckerhart, 461 U.S. 424, , 103 S. Ct. 1933, (1983) (a district court is vested with broad discretion to reduce a fee award based on the results obtained); F.H. Krear & Co. v. Nineteen Named Trustees, 810 F.2d 1250, 1264 (2d Cir. 1987) (noting the general rule that courts will rarely find reasonable an award to a plaintiff that exceeds the amount involved in litigation ); James v. Thermal Master, Inc., 55 Ohio App. 3d 51, 54, 562 N.E.2d 917, 920 (Ohio Ct. App. 1988) (affirming trial court s decision to reduce attorneys fee in light of small jury award). The upshot is that no wise attorney would form a business plan based on bringing claims as small as those involved here on an individual basis in the hopes that a court (or arbitrator) might award attorneys fees proportionate to the complexity of the case. See, e.g., Kristian, 446 F.3d at 59 n.21 (noting that in any individual case, the disproportion between the damages awarded to an individual consumer antitrust plaintiff and the attorney s fees incurred to prevail on the claim would be so enormous that it is highly unlikely that an attorney could ever begin to justify being made whole by the court ); Discover Bank, 36 Cal. 4th at 162, 113 P.3d at (rejecting the contention that the potential availability of attorneys fees... ameliorates the problem posed by the defendant s class action ban); Muhammad, 189 N.J. at 21, 912 A.2d at 100 (holding that the availability of attorney s fees is illusory if it is unlikely that counsel would be 16

24 willing to undertake the representation ). Thus, [t]here is no indication that attorney fees are an adequate substitute for the class action mechanism or that they ameliorate the problems posed by such class-action waivers. Cooper, 2007 WL , at *17. If its arbitration clause is enforced, Dell will be able to escape liability even if it has misrepresented the value of its computers, and consumers will be stripped of their ability to vindicate their rights under New Mexico s UPA, which provides a private remedy to persons likely to suffer pecuniary harm for conduct involving either misleading identification of business or goods or false and deceptive advertising. Stevenson, 112 N.M. at 100, 811 P.2d at The amount in controversy here is a mere ten to twenty dollars per each individual consumer, but on the aggregate, Dell will be able to reap a handsome reward violating New Mexico consumer protection laws if it can effectively insulate itself from liability to an entire class of consumers. This result is unconscionable, and should not be tolerated by this Court. Therefore, this Court should refuse to enforce Dell s exculpatory arbitration clause on the ground that it is substantively unconscionable. B. Dell s Arbitration Clause is Substantively Unconscionable Because it is One- Sided. An additional ground upon which this Court should refuse to enforce Dell s arbitration clause is that the clause is impermissibly one-sided, in that it requires only the consumer to arbitrate his or her claims against Dell, while leaving Dell with the option of arbitrating or litigating its claims against the consumer in court. Under New Mexico law, contract provisions that create unreasonably one-sided allocations of rights in dispute resolution are substantively unconscionable. For example, in Padilla, the defendant insurance company drafted an arbitration clause that required both parties 17

25 to the contract to arbitrate their claims (and was thus far more even-handed than the clause at issue here), but contained a one-way appeal provision (which this Court described as an escape hatch ) that permitted appeals from any award greater than the limits set forth in the Mandatory Financial Responsibility Act. 133 N.M. at 662, 68 P.3d at 902. This Court readily recognized that the escape hatch was unfair: Although facially equal, such escape hatch clauses are not truly equal in their effect on the parties. This is true because both parties are bound by a low award, when an insurance company is unlikely to appeal, and not bound when there is a high award, when an insurance company is more likely to appeal. Thus, the benefits of the clause only favor the insurer, which can use the clause to escape the unwary claimant. Id. at 666, 68 P.3d at 906. Accordingly, this Court held that the escape hatch was substantively unconscionable. 6 Padilla is consistent with the majority of courts in the United States, which hold that arbitration clauses that require only one, but not both, of the parties to the contract to arbitrate their claims are substantively unconscionable. In Taylor v. Butler, 142 S.W.3d 277, 286 n.4 (Tenn. 2004), the Tennessee Supreme Court held that an arbitration clause that required a consumer to bring all claims in arbitration, while permitting practically all of the car dealer s claims to remain in court, was unreasonably favorable to City Auto and oppressive to Taylor, and therefore invalid and unenforceable. In so holding, the court rejected the reasoning of the small number of courts that have upheld one-sided clauses, noting that [w]e find the majority view to be more persuasive. Id. 6 In this case, the language in Dell s arbitration clause is not even facially equal. Instead, the clause brazenly permits its drafter to go to court for nearly any claim that it might have, while forcing the plaintiff to arbitrate any and all claims that he has against Dell. There can be no question, then, that Dell s clause is far more one-sided, and thus far more substantively unconscionable, than the escape hatch struck down by this Court in Padilla. 18

26 Similarly, the Wisconsin Supreme Court struck as unconscionable an arbitration clause similar to the one here. Wisconsin Auto Title Loans, Inc. v. Jones, 280 Wis. 2d 514, 555, 714 N.W.2d 155, 176 (Wis. 2006). While the Wisconsin Supreme Court s lengthy opinion is scholarly and thoughtful, here it is worth simply quoting the key holding: The exception to the arbitration provision is far too broad and onesided, granting Wisconsin Auto Title Loans a choice of forum - arbitration or the circuit court - for its claims, while permitting the borrower to raise claims only before an arbitrator. The doctrine of substantive unconscionability limits the extent to which a stronger party to a contract may impose arbitration on the weaker party without accepting the arbitration forum for itself. Id. at 549, 714 N.W.2d at 173 (footnote omitted). The Tennessee and Wisconsin supreme courts are two of the many courts across the nation that have refused to enforce these types of one-sided arbitration clauses on the ground that they are unconscionable. 7 Since New Mexico s law of unconscionability is animated by the same 7 See Ferguson v. Countrywide Credit Indus., Inc., 298 F.3d 778, (9th Cir. 2002) (striking a one-sided arbitration clause under California law); Ticknor v. Choice Hotels, Inc., 265 F.3d 931, 940 (9th Cir. 2001) (applying Montana law to uphold a finding that an arbitration clause that required only the franchisee to arbitrate claims against a hotel chain, while permitting the hotel chain to bring claims in state or federal court, was unconscionable); Stevens/Leinweber/Sullens, Inc. v. Holm Development and Mgmt., Inc., 795 P.2d 1308, 1313 (Ariz. App. 1990) (finding that a unilateral arbitration provision was so grossly inequitable that it [ran] counter to the philosophy of encouraging arbitration ); Armendariz v. Foundation Health Psychcare Services, Inc., 6 P.3d 669, 692 (Cal. 2000) (holding that it was unfairly one-sided for an employer with superior bargaining power to impose arbitration on the employee as plaintiff but not to accept such limitations when it seeks to prosecute a claim against the employee ); Worldwide Ins. Group v. Klopp, 603 A.2d 788, 791 (Del. 1992) (finding a one-sided arbitration appeal provision unconscionable); Palm Beach Motor Cars Ltd., Inc. v. Jeffries, 885 So.2d 990, 992 (Fla. Dist. Ct. App. 2004) (finding an arbitration provision that required only the purchaser of an automobile, but not the dealer, to resolve all claims in arbitration unconscionable); Iwen v. U.S. West Direct, 977 P.2d 989, (Mont. 1999) (holding that a telephone company s arbitration clause that applied to all claims by advertising customers, but not to its own collection claims, was unconscionable under Montana law, noting that the defendant pointedly protected itself by preserving its constitutional right of access to the judicial system while at the same time completely removing that right from the [plaintiff] ); Williams v. Aetna Fin. Co., 700 N.E.2d 859, (Ohio 1998) (refusing to enforce an arbitration clause in a consumer loan contract that preserved for the finance company the judicial remedy of foreclosure on the debtor s mortgage, but restricted the debtor s remedies solely to arbitration); Arnold v. United Companies Lending Corp., 511 S.E.2d 854, 861 (W. Va. 1998) (striking as unconscionable a one-sided arbitration clause in a home equity loan because allowing such a one-sided agreement to stand would unfairly defeat the [plaintiffs ] legitimate expectations ). 19

27 concern for preventing parties with superior bargaining power from gaining unreasonable advantages, 8 the rule against one-sided arbitration clauses enforced by this Court and the majority of courts across the nation should apply with equal force here. C. Dell s Arbitration Clause Is Procedurally Unconscionable. Although a finding of substantive unconscionability alone is sufficient for this Court to hold Dell s arbitration clause unenforceable, 9 there is substantial evidence to prove that Dell s arbitration clause is procedurally unconscionable as well, thus providing further support for the proposition that this Court should invalidate the clause. To determine whether a contract term is procedurally unconscionable, New Mexico courts analyze the circumstances surrounding the contract formation, including the particular party s ability to understand the terms of the contract and the relative bargaining power of the parties. Guthmann, 103 N.M. at 510, 709 P.2d at 679. As explained below, the circumstances under which Dell imposed its arbitration clause on unsuspecting consumers compels a finding that this agreement was formed in a procedurally unconscionable manner. The first step towards a finding of procedural unconscionability is determining whether the contract is one of adhesion. Id. at 509, 709 P.2d at 678. This Court has identified three elements that are indicative of an adhesive contract: First, the agreement must occur in the form of a standardized contract prepared or adopted by one party for the acceptance of the other. Second, the party proffering the standardized contract must enjoy a superior bargaining position because the weaker party virtually 8 Monette, 1999 NMCA 040, 126 N.M. at 752, 975 P.2d at 365 (noting that contract terms are substantively unconscionable when they unreasonable favor the drafter of the contract at the expense of the other party). 9 Thompon, 2006 WL , at *9; Padilla, 2003 NMSC 011, 133 N.M. at 667, 68 P.3d at 907; Garley, 111 N.M. at 389, 806 P.2d at