Opinion
No. 03 C 2646.
April 1, 2004
Plaintiff Donald Plattner ("Plattner") — an Illinois resident — has sued defendant Edge Solutions, Inc. ("Edge") claiming that Edge violated various provisions of the Credit Repair Organization Act, 15 U.S.C. § 1679, et seq., when it provided debt consolidation services to Plattner. Edge has moved to stay proceedings in this court, arguing that Plattner's claims are subject to the arbitration clause in the December 22, 2000 Letter Agreement which governs the parties' relationship. The arbitration clause provides that: "In the event of any claim, dispute or controversy between the parties hereto and relating to the validity, construction, performance, breach or termination of this Agreement or otherwise, both parties agree to submit such claim dispute or controversy to arbitration in Suffolk County, New York in accordance with the rules of the American Arbitration Association ("AAA")." Magistrate Judge Ashman concluded that the forum selection language of the arbitration clause was substantively unconscionable but compelled the parties to arbitrate their dispute in Chicago, where plaintiff resides. Plattner objects to Magistrate Judge Ashman's ruling, arguing that the arbitration clause is unenforceable in its entirety.
Contractual forum selection clauses are prima facie valid. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). However, such a clause is unenforceable if "trial in the contractual forum will be so gravely difficult and inconvenient that [plaintiff] will for all practical purposes be deprived of his day in court." Id. at 18; see also Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 90 (2000) ("the existence of large arbitration costs could preclude a litigant . . . from effectively vindicating her federal statutory rights in the arbitral forum"); Arnold v. Goldstar Fin. Sys., Inc., No. 01-C-7694, 2002 WL 1941546, *9-10 (N.D. Ill. Aug. 22, 2002) (holding arbitration agreement substantively unconscionable because of prohibitive arbitration costs).
The court agrees with Magistrate Judge Ashman's conclusion that the arbitration clause is substantively unconscionable because the estimated travel costs for plaintiff — when considered in tandem with the likely costs of arbitration — are prohibitive in light of Plattner's financial difficulties. Plattner has fulfilled his burden of showing that he cannot afford the $1300-$2500 in travel and arbitration costs that he would likely incur if forced to travel from Illinois to New York to arbitrate his claim. Because Plattner is in severe financial straights — and because his claim is worth less than $5,000 — the forum selection clause effectively precludes plaintiff from bringing his claim.
However, despite the practical appeal of this approach, the court reluctantly disagrees with Magistrate Judge Ashman's order severing the forum selection language from the rest of the arbitration clause and compelling arbitration in Chicago. Under New York law, "Whether a contract is entire or severable generally is a question of intention, to be determined from the language employed by the parties, viewed in the light of the circumstances surrounding them at the time they contracted." Christian v. Christian, 365 N.E.2d 849, 856 (N.Y.App.Div. 1977). Normally, that intent is evidenced by the parties' inclusion of a severability provision in the contract. However, the contract in this case does not contain any severability language. Moreover, nothing in the arbitration clause reflects an intent to select an alternative forum if arbitration in New York is impracticable. While the agreement to arbitrate is separable from the substantive provisions of the contract, the court cannot rewrite the arbitration clause to compel arbitration in a forum not contemplated by the parties when the contract was executed. See, e.g., National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326, 333-34 (5th Cir. 1987).
The court concludes, therefore, that the arbitration clause is unenforceable in its entirety because its terms are substantively unconscionable. Edge's motion to stay proceedings pending action to compel arbitration is denied. In the event, however, that Edge were to agree to bear plaintiff's reasonable travel expenses and arbitration costs — which Plattner estimates at $1300 to $2500 — the court would be willing to entertain a motion to reconsider its decision on that basis.