BLACK, Circuit Judge:
Plaintiffs-Appellants are Georgia residents and subscribers of defendant Comcast Corporation (Comcast), a cable television provider. The subscribers filed a class action lawsuit against Comcast alleging violations of state law based on the Cable Communications Policy Act of 1984, 47 U.S.C. § 521 et seq. (Cable Act). The district court dismissed the action and compelled arbitration, finding the subscribers had entered into binding arbitration agreements with Comcast. After oral argument and a careful review of the record, we find the arbitration agreements unenforceable and reverse and remand to the district court for further proceedings.
I. BACKGROUND
The Cable Act authorizes local governments to charge cable operators a franchise fee for the use of public rights-of-way, provided the fee does not exceed five percent of the cable operator's gross revenue. 47 U.S.C. § 542(a), (b). The Act permits cable operators, in turn, to pass the franchise fees through to their subscribers. See id. § 542(c). The Act also requires cable operators to "pass through . . . the amount of any decrease in a franchise fee." Id. § 542(e).
The subscribers allege Comcast calculates its "pass-through" franchise fees by
On December 12, 2005, Dale, as class action representative, filed a complaint in state court asserting claims of "unjust enrichment" and "money had and received." The class seeks an accounting of funds wrongfully withheld, repayment of excess franchise fees, and declaratory and injunctive relief. Comcast removed the action to federal court and filed a motion to compel arbitration and dismiss, arguing the subscribers' individual claims were governed by written arbitration agreements.
In its motion, Comcast argued that each subscriber received its 2004 "Policies and Procedures," an annual notice containing a mandatory arbitration provision, with his or her December invoice or in a welcome kit given to each new subscriber at the time of service installation. The arbitration section in the notice, titled "Mandatory & Binding Arbitration" (the Arbitration Provision), provides that either the subscriber or Comcast may elect to arbitrate a dispute rather than litigate the dispute in court. The Arbitration Provision also contains a class action waiver clause prohibiting subscribers from bringing claims on a class action or consolidated basis. The waiver states:
Comcast argued the subscribers accepted the Arbitration Provision, including the class action waiver, by their continued subscription to Comcast's services after receiving the notices.
In response to Comcast's motion to compel arbitration and dismiss, the subscribers disputed having received the 2004 "Policies and Procedures" or having agreed to the Arbitration Provision, and they requested a jury trial on the issue of whether they each had entered into an arbitration agreement with Comcast. They also argued that, even if the Arbitration Provision constituted an agreement to arbitrate, the class action waiver was unconscionable and therefore unenforceable as a matter of law.
On September 19, 2006, the district court granted Comcast's motion to compel arbitration and dismiss and denied the subscribers' request for a jury trial. The court found the Arbitration Provision was binding and the class action waiver was not unconscionable. The subscribers timely appealed arguing, inter alia, the district court erred in failing to find the class action waiver unconscionable and in granting Comcast's motion to compel arbitration and dismiss.
II. DISCUSSION
We review the district court's grant of Comcast's motion to compel arbitration and dismiss de novo. Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359, 1368 n. 6 (11th Cir.2005). The issue presented is whether the Arbitration Provision's class action waiver is unconscionable under Georgia law and thus unenforceable as a matter of law.
Under the Federal Arbitration Act, 9 U.S.C. § 1 et seq. (FAA), written agreements to arbitrate a dispute arising out of a transaction involving commerce are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Id. § 2. "The FAA allows state law to invalidate an arbitration agreement, provided the law at issue governs contracts generally and not arbitration agreements specifically." Bess v. Check Express, 294 F.3d 1298, 1306 (11th Cir.2002). Thus, "generally applicable contract defenses, such as fraud, duress, or unconscionability, may be applied to invalidate arbitration agreements." Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 686-87, 116 S.Ct. 1652, 1656, 134 L.Ed.2d 902 (1996).
Here, the subscribers argue Comcast's class action waiver is unenforceable as a matter of law because it is unconscionable under applicable Georgia law. "[T]he basic test for determining unconscionability is `whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.'" NEC Techs., Inc. v. Nelson, 267 Ga. 390, 478 S.E.2d 769, 771 (1996) (quoting U.C.C. § 2-302 cmt. 1).
The subscribers argue Comcast's class action waiver is substantively unconscionable.
The subscribers also explain that even though the Arbitration Provision requires Comcast to advance arbitration filing fees and the arbitrator's cost and expenses upon written request, it holds the subscribers responsible for additional costs, including fees for attorneys and expert witnesses. Comcast will only pay those fees and costs which it is required to pay by law. If Comcast prevails, the Arbitration Provision further requires the subscribers to reimburse Comcast for advanced fees up to the amount the subscribers would have paid to file the claim in state court.
Comcast responds that our decision in Caley v. Gulfstream Aerospace Corp., 428 F.3d 1359 (11th Cir.2005), disposes of the subscribers' substantive unconscionability argument. In Caley, we considered, inter alia, whether Gulfstream's dispute resolution policy (DRP), which required its employees to submit certain employment-related claims to arbitration, was unconscionable under Georgia law. Id. at 1377-79. The plaintiffs claimed the DRP was substantively unconscionable for several reasons, including that it limited discovery and prohibited class actions. The Court's discussion of this argument was rather brief. We stated:
Id. at 1378 (internal quotations, citations, and footnote omitted).
We do not agree with Comcast that Caley requires us to conclude the class action waiver is enforceable. In Caley, we determined only that under the specific facts of that case, the DRP prohibiting class actions was enforceable, not that every class action waiver is enforceable under Georgia law.
We recognize that in at least two other cases, we have found arbitration agreements precluding class action relief to be valid and enforceable. Jenkins v. First Am. Cash Advance of Ga., LLC, 400 F.3d 868, 877-78 (11th Cir.2005); Randolph v. Green Tree Fin. Corp.-Ala., 244 F.3d 814, 819 (11th Cir.2001). Like Caley, however, both Jenkins and Randolph involved claims for which attorneys' fees and other costs were recoverable. For example, in Jenkins, the plaintiff filed a class action lawsuit, alleging that certain "payday" loan agreements violated Georgia's usury statutes and the Georgia Racketeer Influenced and Corrupt Organizations (RICO) Act.
On appeal, however, we determined the class action waiver was not unconscionable. In rejecting the district court's conclusion, we noted that we had previously held in Randolph that "a contractual provision to arbitrate [Truth-In-Lending-Act (TILA)] claims is enforceable even if it precludes a plaintiff from utilizing class action procedures in vindicating statutory rights under TILA."
Here, unlike the plaintiffs in Caley, Jenkins, and Randolph, the subscribers cannot recover attorneys' fees under the Cable Act for the specific violations alleged. While the Cable Act provides for attorneys' fees and costs for violations of 47 U.S.C. § 551 (Protection of Subscriber Policy) and § 553 (Unauthorized Reception of Cable Service), it does not provide for attorneys' fees and costs for a violation of § 542 (Franchise Fees). We recognize that the subscribers assert state law claims and, under state law, the subscribers may be able to recover fees and costs. Georgia law provides that "[t]he expenses
In a recent case, Kristian v. Comcast Corp., 446 F.3d 25 (1st Cir.2006), the First Circuit addressed the enforceability of arbitration agreements invoked by Comcast against a group of Boston subscribers suing Comcast for violations of state and federal antitrust law. Id. at 29. The Boston subscribers argued the arbitration agreement prevented them from vindicating their statutory rights by, among other things, prohibiting the use of the class mechanism. Id. at 37. In deciding whether the class action waiver was valid, the First Circuit first noted that "the legitimacy of the arbitral forum rests on the presumption that arbitration provides a fair and adequate mechanism for enforcing statutory rights." Id. at 54 (internal quotation omitted). Relying on unopposed expert evidence presented by the plaintiffs, the court found that the bar on class arbitration threatens this presumption given the "complexity of an antitrust case generally, and the complexity and cost required to prosecute a case against Comcast specifically." Id. at 58. "[W]ithout some form of class mechanism-be it class action or class arbitration-a consumer antitrust plaintiff will not sue at all." Id. at 58.
While the subscribers in the instant case do not argue the class action waiver prevents them from vindicating their statutory rights, we nonetheless find the First Circuit's analysis in Kristian instructive. Without the benefit of a class action mechanism, the subscribers would effectively be precluded from suing Comcast for a violation of 47 U.S.C. § 542. The cost of vindicating an individual subscriber's claim, when compared to his or her potential recovery, is too great. Additionally, because the Cable Act does not provide for the recovery of attorneys' fees or related costs for the violations alleged by the subscribers, and because state law allows fees and costs to be awarded only where bad faith is shown, it will be difficult for a single subscriber to obtain representation. This will allow Comcast to engage in unchecked market behavior that may be unlawful. Corporations should not be permitted to use class action waivers as a means to exculpate themselves from liability for small-value claims.
We thus conclude that the enforceability of a particular class action waiver in an arbitration agreement must be determined on a case-by-case basis, considering the totality of the facts and circumstances. Relevant circumstances may include, but are not limited to, the fairness of the provisions, the cost to an individual plaintiff of vindicating the claim when compared to the plaintiff's potential recovery, the ability to recover attorneys' fees and other costs and thus obtain legal representation to prosecute the underlying claim, the practical affect the waiver will have on a company's ability to engage in unchecked market behavior, and related public policy concerns.
III. CONCLUSION
Here, based on the totality of circumstances, we conclude the Comcast class action waiver is unconscionable to the extent it prohibits the subscribers from bringing a class action alleging state law claims based on a violation of the Cable Act's franchise fee provisions, 47 U.S.C. § 542. Because the class action waiver cannot be severed from the Agreement, the entire arbitration provision is rendered unenforceable. We reverse and remand to the district court for further proceedings.
REVERSED AND REMANDED.
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