Fisher v. Moneygram Int'l, Inc., A158168

• Court: California Court of Appeals
• Writing for the Court: STREETER, Acting P. J.
• Citation: 66 Cal.App.5th 1084,281 Cal.Rptr.3d 771
• Parties: Jonathan FISHER, Plaintiff and Respondent, v. MONEYGRAM INTERNATIONAL, INC., Defendant and Appellant.
• Decision Date: 29 June 2021
• Docket Number: A158168

66 Cal.App.5th 1084
281 Cal.Rptr.3d 771

Jonathan FISHER, Plaintiff and Respondent,
v.
MONEYGRAM INTERNATIONAL, INC., Defendant and Appellant.

A158168

Court of Appeal, First District, Division 4, California.

Filed June 29, 2021

Norton Rose Fulbright US, Eric A. Herzog, Michelle L. Carter, Los Angeles; Wolfe & Wyman, Brian H. Gunn, Walnut Creek, for Defendant and Appellant.

Hammond Law, Julian A. Hammond, Los Angeles, Polina Brandler ; Goldstein, Borgen, Dardarian & Ho, Laura L. Ho, Anne P. Bellows, Oakland; Katz, Marshall & Banks, Daniel B. Edelman, pro hac vice, for Plaintiff and Respondent.

STREETER, Acting P. J.

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In this case we assess the validity of an arbitration provision in a consumer adhesion contract that reduces the length of the statute of limitations, invokes the application of the arbitrators’ higher commercial fees, and requires consumers to bear their own costs and fees for

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experts and attorneys. We conclude the arbitration provision is unconscionable largely because it was hidden on the back side of a money transfer order form, in tiny 6-point print that we deem virtually illegible. Because the arbitration provision operated largely to benefit defendant MoneyGram International, Inc. (MoneyGram) at plaintiff Jonathan Fisher's expense, we affirm the superior court's order denying MoneyGram's petition to compel arbitration.

I. BACKGROUND

A. The MoneyGram Transactions and the Arbitration Provision

MoneyGram is a global financial company that enables customers to transfer money to various locations in the United States and around the world. Consumers can make MoneyGram transactions online, through a mobile platform or kiosk, or at an agent location in retail stores such as Walmart.

On February 17 and 18, 2016, Jonathan Fisher, a 63-year-old Vietnam War-era Veteran with poor eyesight, initiated money transfers at two different Walmart stores in California, the first for $2,000 to a recipient in Rockmart, Georgia, and the second for $1,530 to a recipient in Baton Rouge, Louisiana. In order to proceed with

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the transactions, Fisher was required to complete a MoneyGram Money Transfer Form (Send Form), which requests information regarding the sender, amount to be sent, receiver, destination and receiving options. MoneyGram processed Fisher's money transfer requests, and the funds were delivered to the intended recipients. On neither of these occasions did Fisher turn over the Send Form and try to read the Terms and Conditions on the reverse, which included an arbitration requirement (Arbitration Provision). But even if he had tried to read the tiny print, he would not have been able to do so—even wearing his trifocal glasses—at least not without a magnifying glass.

The Arbitration Provision is reproduced below, and in a larger context, in the appendices to this opinion:¹

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B. The Lawsuit

Fisher sued MoneyGram in March 2019, claiming that the two money transfers he completed in February 2016 were induced by a "scammer," and that MoneyGram knew its system was used by scammers but failed to warn or protect Fisher from "the scheme he had fallen victim to." The scheme was for the scammer to promise the victim a large sum of money (lottery winnings, inheritances, grants, loans or other financial benefits) if only the victim would send a comparatively small sum to the scammer, said to represent taxes, import fees, or some other concocted story.

Fisher alleged that MoneyGram's funds transfer service was used frequently in fraudulent transactions because under MoneyGram's policies the money would be immediately available upon transfer to the scammer at a Walmart store or other MoneyGram outlet. Other money transfer services, such as bank transfers, place a temporary hold on the funds to discourage or prevent fraudulent transactions. In fact, Fisher alleged, MoneyGram was so remiss in protecting its customers from fraud that it had been the subject of a Federal Trade Commission (FTC) permanent injunction since October 21, 2009, requiring it to establish, implement, and maintain a comprehensive anti-fraud program to protect its consumers. (Federal Trade Commission v. MoneyGram International, Inc. (N.D.Ill., Oct. 21, 2009, No. 09-cv-6576) ECF No. 13.) But Fisher claims MoneyGram failed to abide by the injunction.

The complaint alleges that MoneyGram (1) failed to disclose "fraud occurring via its service[s]" as well as information necessary to detect and avoid such fraud; (2) knew that its system was being used to defraud consumers and failed to take steps to protect such consumers; and (3) failed to comply with the FTC order enjoining such steps be taken. Based on these allegations, Fisher purports to represent a class of "all other similarly situated persons who transferred money while in California using

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MoneyGram's money transfer service pursuant to a fraudulent scheme ... since October 20, 2009." The complaint asserts one cause of action under the unfair competition law (UCL). ( Bus. & Prof. Code, § 17200 et seq. ) The complaint seeks restitution, injunctive and declaratory or other equitable relief, as well as attorney fees and costs under Code of Civil Procedure section 1021.5.

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C. The Petition To Compel Arbitration

In May 2019, MoneyGram petitioned to compel arbitration, and Fisher opposed the petition, arguing the agreement to arbitrate was invalid for two reasons. First, Fisher argued that no agreement to arbitrate was formed because MoneyGram did not obtain Fisher's informed consent to its terms. Second, Fisher argued that the Arbitration Provision was unenforceable because it was both procedurally and substantively unconscionable. In reply, MoneyGram contended that a valid agreement to arbitrate existed with no procedural or substantive unconscionability. MoneyGram also requested that the court sever any provisions deemed unenforceable.

On August 16, 2019, Judge Winifred Y. Smith of Alameda County Superior Court held a hearing and issued a written order denying MoneyGram's petition to compel arbitration. The court ruled the Arbitration Provision was unenforceable as both procedurally and substantively unconscionable, and it declined to sever any provision. The court ruled, first, that the Arbitration Provision's "6 point font," placement "on the back side of the Send Form," and "take it or leave it nature" were "indication[s]" of procedural unconscionability. Second, the court ruled that the Arbitration Provision's "one year statute of limitations," "requirement that any plaintiff pay the [American Arbitration Association (AAA)] commercial arbitration costs and fees," and the "waiver of attorneys’ fees" were substantively unconscionable "in the aggregate," and that it "could not sever these three provisions because to do so would make material changes in the agreement as a whole."

Given its ruling on the unconscionability issue, the court did not address Fisher's additional argument that no valid contract had been formed. (See Domestic Linen Supply Co., Inc. v. L J T Flowers, Inc. (2020) 58 Cal.App.5th 180, 185, 272 Cal.Rptr.3d 291 [court held no arbitration agreement had been formed where arbitration clause was buried in a "thicket of fine print" on a back page of the contract, after the signature line].)

MoneyGram appealed. ( Code Civ. Proc., § 1294, subd. (a).)

II. DISCUSSION

A. What the Contract Says

For those who had trouble reading the Arbitration Provision as presented to Fisher and replicated above, we quote the text again in our normal 13-point typeface:

"ARBITRATION. UNLESS OTHERWISE SPECIFIED BY APPLICABLE LAW, ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THE TRANSFER, THE AGREEMENT OR BREACH OF THIS AGREEMENT, INCLUDING STATUTORY CONSUMER CLAIMS, SHALL BE SETTLED BY ARBITRATION ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION ("AAA") UNDER ITS

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COMMERCIAL ARBITRATION RULES. JUDGMENT

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ON THE ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. ANY SUCH ARBITRATION SHALL BE INITIATED AND HELD IN THE OFFICE OF THE AAA CLOSEST TO THE AGENT LOCATION WHERE YOU INITIATED THE TRANSFER. EACH PARTY SHALL BEAR ITS OWN COSTS AND FEES FOR EXPERTS AND ATTORNEYS, AND NO PARTY SHALL HAVE A RIGHT TO PARTICIPATE AS A MEMBER OF ANY CLASS OF CLAIMANTS. THIS EXCLUSIVE ARBITRATION REMEDY SHALL NOT BE AVAILABLE UNLESS INITIATED WITHIN ONE YEAR AFTER THE CONTROVERSY OR CLAIM AROSE."

This, then, is the contract that Judge Smith refused to enforce because she found it both procedurally and substantively unconscionable.

B. Unconscionability Doctrine...