Can a Florida court refuse to enforce this clause as unconscionable, and what must the challenger show?
Both procedural and substantive unconscionability must be established, but they need not be present to the same degree: the Florida Supreme Court adopted the balancing, or sliding-scale, approach (Basulto). Read that adoption with the case it was decided in. Basulto quashed the Third District for conflict with Seifert and remanded with instructions to restore in full the trial court's order, which had found as a matter of law that no valid agreement to arbitrate existed; and the Court added in a footnote that the defences-to-enforcement analysis, unconscionability included, 'should not have been applied in the appeal below'. So the sliding-scale passage is the Court's statement of the governing approach, not the ground on which the case turned. Under that approach the more substantively oppressive the term, the less evidence of procedural unconscionability is required, and vice versa. For contracts for the sale of goods, Fla. Stat. § 672.302(1) supplies the remedy: the court may refuse to enforce the contract, enforce the remainder without the unconscionable clause, or limit the clause's application, judged as a matter of law at the time the contract was made. § 672.302(2) entitles the parties to a reasonable opportunity to present evidence of the clause's commercial setting, purpose and effect.
The trap
A challenger who proves only an oppressive term loses, and so does one who proves only a take-it-or-leave-it signing: both elements must be present. Basulto rejected the approach of district courts (it cites the Second District in Bland and the Third District in Mahan) that assessed the two prongs independently and stopped if either was lacking. The practical corollary for a drafter is that curing the process (real disclosure, time to read) reduces exposure, because under the sliding scale a very harsh term needs less procedural unfairness to fail.
7 authorities
The words that state the rule
However, we conclude that while both elements must be present, they need not be present to the same degree. This balancing, or sliding scale, approach, which we adopt, is considered to be the prevailing view in Florida: The prevailing view is that [procedural and substantive unconscionability] must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability. But they need not be present in the same degree. Essentially a sliding scale is invoked which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves. In other words, the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.
The words that state the rule
We agree with our district courts of appeal that procedural and substantive unconscionability must be established to avoid enforcement of the terms within an arbitration agreement.
The words that state the rule
Other Florida courts, reject the balancing, or sliding scale, approach and assess procedural and substantive elements independently, concluding the analysis if either element is lacking. See, e.g., Nat’l Fin. Servs., LLC v. Mahan, 19 So. 3d 1134, 1136 (Fla. 3d DCA 2009) (“Because the arbitration provisions in this case suffered from no procedural malady, we do not reach the question of substantive unconscionability.”) abrogated on other grounds by Shotts v. Op Winter Haven, Inc., 86 So. 3d 456 (Fla. 2011); Bland, 927 So. 2d at 257 (“This court, however, eschews the ‘sliding scale’ approach. Rather we assess procedural unconscionability and substantive unconscionability independently.”). - 25 - We conclude that the better approach—more in keeping with the pronouncement of this Court on unconscionability over eighty years ago in Peacock Hotel—is the balancing, or sliding scale, approach.
- statuteFla. Stat. § 672.302enactment date not established
The words that state the rule
(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
- statuteFla. Stat. § 672.302enactment date not established
The words that state the rule
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
The words that state the rule
5. The Third District’s discussion about the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), see ch. 501, Fla. Stat. (2004), was part of its analysis of the Clause. Basulto, 22 So. 3d at 588, 591-92. We have determined that the defenses to contract enforcement analysis, including unconscionability, should not have been applied in the appeal below. Accordingly, we find no need to discuss the issue of whether the purported arbitration agreements are contrary to the public policy embodied in FDUTPA.
The words that state the rule
III. CONCLUSION We quash the Third District’s decision on review because it conflicts with our controlling precedent set forth in Seifert. Accordingly, we remand this cause to the Third District with instructions to order the full restoration of the circuit court’s March 8, 2007, nonfinal order. Upon reinstatement of its order that was the subject of this review, the trial court should appropriately address our decision that the buyers be awarded reasonable appellate attorney’s fees. It is so ordered. PARIENTE, LEWIS, QUINCE, and LABARGA, JJ., concur. POLSTON, C.J., dissents with an opinion in which CANADY, J., concurs.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.