Connie A. Nagrampa v. Mailcoups, Inc. The American Arbitration Association

469 F.3d 1257 Connie A. NAGRAMPA, Plaintiff-Appellant, v. MAILCOUPS, INC.; The American Arbitration Association, Defendants-Appellees. No. 03-15955. United States Court of Appeals, Ninth Circuit. Argued and Submitted En Banc September 27, 2005. Filed December 4, 2006. COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED COPYRIGHT MATERIAL OMITTED Kate Gordon & Leslie A. Bailey, Trial Lawyers for Public Justice, Oakland, CA; F. Paul Bland, Trial Lawyers for Public Justice, Washington, D.C.; Sanford M. Cipinko, Law Offices of Sanford M. Cipinko, San Francisco, CA, for the plaintiff-appellant. Glenn J. Plattner and Christine S. Oh, Jenkens & Gilchrist, LLP, Los Angeles, CA, for the defendant-appellee MailCoups, Inc. John S. Warnlof, Warnlof & Sumnick, Walnut Creek, CA; Shirley M. Hufstedler, Morrison & Foerster, LLP, Los Angeles, CA, for the defendant-appellee, American Arbitration Association. Appeal from the United States District Court for the Northern District of California; Martin J. Jenkins, District Judge, Presiding. D.C. No. CV-03-00208-MJJ. Before SCHROEDER, Chief Judge, REINHARDT, KOZINSKI, O'SCANNLAIN,…

Opinion by Judge WARDLAW; Partial concurrence and Partial Dissent by Judge CLIFTON; Dissent by Judge O’Scannlain; Dissent by Judge KOZINSKI

OPINION

with whom Chief Judge SCHROEDER, Judges REINHARDT, THOMAS, GRABER, FISHER, and GOULD join, and with whom Judge CLIFTON joins as to Part II-A and II-B.

The question before us is whether a provision to submit to arbitration in a written franchise agreement is valid and enforceable, therefore requiring the district court to stay proceedings and refer the disputed franchise agreement to arbitration under the Federal Arbitration Act (“FAA”), 9 U.S.C. §§ 1-16 (2000). In a now-withdrawn opinion, a three-judge panel of our court held that the unconsciona-bility of an arbitration provision contained in the franchise agreement is a question for the arbitrator to decide. Here, however, the plaintiff did not seek invalidation of the franchise agreement as a whole on grounds of unconscionability; instead she challenged the unconscionability of solely the arbitration provision. Therefore, it was error to hold that consideration of the unconscionability of the arbitration provision was to be determined by the arbitrator.

We review this case en…

with whom Judges KOZINSKI and TALLMAN join, and with whom Judge CLIFTON joins as to Parts II-D and III, dissenting:

I respectfully dissent because I believe that the Court ignores clear Supreme Court precedent in choosing to entertain Nagrampa’s challenge to the validity of the entire franchise contract. In addition, I cannot agree with much of the majority’s analysis regarding the substantive uncon-scionability of the arbitration clause.

I

Connie A. Nagrampa, a resident of Contra Costa County (in the San Francisco Bay area), California, earned over $100,000 per year as a Sales Manager for ValPak Direct Marketing Systems, a position she held from 1992-1998.

In the summer of 1998, a MailCoups, Inc., 1 representative approached Nagram-pa and encouraged her to become a Mail-Coups franchisee. 2 In June of that year, MailCoups sent Nagrampa a notebook containing a franchise offering circular and franchise agreement. After Nagrampa *1295 prepared a spreadsheet showing her expected costs and profits, her contact at MailCoups confirmed that her calculated 41 percent profit figure was “about right.”

On August 24, 1998, Nagrampa signed the thirty-page franchise agreement, declaring…

with whom Judges O’SCANNLAIN and TALLMAN join, and with whom Judge CLIFTON joins as to Part II, dissenting:

I agree with Judge O’Scannlain that Na-grampa’s uneonscionability challenge *1307 should have been decided by an arbitrator, and that her contract with MailCoups was not substantively unconscionable. I write separately to dispute the majority’s conclusion that Nagrampa did not waive the right to contest arbitrability after participating in the arbitration proceedings for almost a year, and its finding that the arbitration was procedurally unconscionable.

I. Waiver

The majority reads Nagrampa’s February 6, 2002, letter to the arbitrator as a “forceful” objection to arbitrability. Maj. at 1280. But Nagrampa never said she objected — she merely expressed “serious concerns” about the “validity” of the arbitration clause. This statement contained none of the traditional indicia of a properly articulated objection. She never said “I object,” and she provided no grounds for her purported concerns. Most significantly, she never submitted the issue to the arbitrator.

For an example of a real objection, we need look no farther than that same letter, where Nagrampa clearly states…

concurring in part and dissenting in part:

I agree with the majority that the district court properly undertook in this case to decide whether the arbitration provision in the MailCoups franchise agreement is valid and enforceable within the meaning of the Federal Arbitration Act. I also agree that Nagrampa did not waive her right to object to the arbitrability of the dispute. I thus concur in sections II-A and II-B of the majority opinion by Judge Wardlaw. .

I part company with the majority as to its conclusion that the arbitration provision was unconscionable under California law. I believe that the district court was correct in concluding that the arbitration provision was valid and enforceable. I concur in the relevant portions of the dissents by Judge O’Scannlain (sections II-D and III) and by Judge Kozinski (section II). Like them, I would affirm the judgment of the district court.