Arbitration: Arbitration Fee Clause Saying That Both Sides Bear Their Own Fees, Subject To Reallocation By Arbitrator, Did Aid Substantive Unconscionability Determinations By Trial And Appellate Courts

CLRA Claims Require Bad Faith Prosecution To Award Prevailing Party Fees To Defendants, With The Clause Not Covering This Eventuality.

            Gostev v. Skillz Platform, Inc., Case No. A164407 (1^st Dist., Div. 2 Feb. 28, 2023) (published) is a must read for litigants and their attorneys on the enforceability of delegation and other arbitration damage/statute of limitation restrictions in an arbitration clause.  The conclusion in this opinion was that the arbitration clause was unconscionable, with transactional attorneys benefiting from the reasoning in Gostev.

            The arbitration clause had this fees provision: “Each party shall bear its own attorneys’ fees, costs and disbursements arising out of the arbitration, and shall pay an equal share of the fees and costs of the arbitrator and AAA; however, the arbitrator may award to the prevailing party reimbursement of its reasonable attorneys’ fees and costs (including, for example, expert witness fees and travel expenses), and/or the fees and costs of the arbitrator.”

            Among other aspects of the arbitration clause which rendered it substantively unconscionable, the fees clause was too generic (Newton v. American Debt Services, Inc., 854 F. Supp.2d 712, 725 (N.D. Cal. 2012)), not recognizing that fees under California’s Consumer Legal Remedies Act are not awardable to a prevailing defendant unless plaintiff’s case was found not to have been prosecuted in good faith.  This infirmity in the fees clause, along with other factors, cemented the conclusion that the arbitration clause was unconscionable.