Meoli v. AT & T Wireless

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Filed 5/18/05 Meoli v. AT&T Wireless Services CA1/5
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or
ordered published for purposes of rule 977.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FIVE
PORSHA MEOLI, ALAN CHERRIGAN,
JAEL SALAS, et al.,
Plaintiffs and Respondents,
v.
AT&T WIRELESS SERVICES, INC., et al.,
Defendants and Appellants.
A106061, A106340, A106341
(Alameda County
Super. Ct. No. JCCP 4332)
In Szetela v. Discover Bank (2002) 97 Cal.App.4th 1094 (Szetela), the Court of
Appeal held an arbitration clause prohibiting class-wide arbitration to be unconscionable
and unenforceable. The trial court in the present case relied upon Szetela to rule that the
arbitration clause at issue here is likewise unconscionable. Recognizing that the issue is
pending before our Supreme Court, we will not follow Szetela and will conclude instead
that under the facts in the present case the contractual ban on class-wide arbitration is not
unduly one-sided, harsh, or in violation of public policy.1
FACTUAL AND PROCEDURAL BACKGROUND
Three separate lawsuits were initially brought against defendant AT&T Wireless
and other providers of wireless telephone service, challenging the “early termination fee”

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charged to customers who end their wireless telephone service before the expiration of
the term of the service agreement.
First, Porsha Meoli and two other named plaintiffs brought a class action in
Alameda County to challenge both the early termination fee and AT&T’s locked handsets
that preclude the use of competitors’ networks. Plaintiffs alleged that the early
termination fee constituted an unlawful liquidated damages provision and thereby
violated the Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.) and the
Consumers’ Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.). Second, Diane
Tucker sued in Orange County under similar theories as a private attorney general under
the UCL. And, in the third lawsuit, Jerilyn Marlowe and seven other named plaintiffs
brought a class action in Alameda County alleging violations of the UCL and the CLRA.
These three lawsuits were coordinated with other lawsuits pending against other wireless
service providers.
Customers who purchase a mobile telephone for use on the AT&T wireless system
are subject to the terms and conditions of a wireless service agreement that comes with
the phone. The customer has 30 days in which to review the terms and to cancel the
agreement. Over the years, the exact language of the wireless service agreement has been
altered, and there are three variations at issue in the lawsuits here.2 All three versions
contain an arbitration clause calling for the arbitration of all disputes arising out of the
wireless service agreement. All three versions provide that the arbitration is to be
governed by the wireless industry arbitration rules of the American Arbitration
1 The issue is pending before the California Supreme Court in Discover Bank v.
Superior Court , review granted April 9, 2003 (S113725), and Mandel v. Household
Bank, review granted April 9, 200 (S113699).
2 In 2001 and 2002, AT&T Wireless customers received a “welcome guide” with
the telephone that contained the terms and conditions of the wireless service. The
plaintiffs in the Meoli lawsuit received a welcome guide. Beginning in 2003, customers
received a wireless service agreement. The plaintiffs in the Marlowe lawsuit received a
wireless service agreement.

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Association. Moreover, under all three versions the customer retains the right to bring an
action in small claims court notwithstanding the agreement to arbitrate all disputes.
The arbitration clause allows only individual claims to be heard in arbitration. The
early versions of the wireless service agreement provided that the arbitrator could not
award relief on a class-wide or representative basis. The later version is even more
explicit: “[A]ny arbitration will be conducted on an individual basis and not on a
consolidated, class-wide, or representative basis.”
The latest version of the arbitration agreement sets up a three-tiered system for
allocation of costs. If the customer’s claim is for less than $1,000, the customer must pay
a fee of $25, and AT&T will pay the balance of administrative fees and costs. If the
customer’s claim is between $1,000 and $75,000, then the customer must share in the
costs of arbitration, but need pay no more than the equivalent court filing fee. And, if the
claim is in excess of $75,000, then all administrative costs and expenses will be divided
equally. The earlier versions had only a two-tiered system: $25 fee for claims under
$1,000 and equal division of costs for claims above $1,000.
AT&T initially petitioned to compel arbitration in the Meoli lawsuit and, after the
Marlowe and Tucker lawsuits were filed, petitioned in those cases as well. AT&T further
requested that any arbitration conducted be limited to arbitration of individual claims.
Plaintiffs opposed the petition, arguing, that the arbitration clause was unconscionable in
various particulars, including the ban on class-wide relief. The trial court rejected
plaintiffs’ other arguments on the unconscionability of the arbitration clause , but the trial
court agreed that the ban on class-wide arbitration is unconscionable and invalid under
the Court of Appeal decision in Szetela, supra, 97 Cal.App.4th 1094. The court denied
AT&T’s petition to compel arbitration. By way of dictum, the court noted that because
the arbitration clause is not otherwise unconscionable, if Szetela were not to be followed,
arbitration would be compelled on an individual basis and not as a class or representative
claim. AT&T filed its notice of appeal from the order denying arbitration.
Meanwhile, two additional lawsuits were filed against AT&T challenging the
early termination fee--one by Alan Cherrigan on behalf of himself and the general public

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under the UCL and the second by Jael Salas. Those two lawsuits were added to the
coordination proceeding, and by stipulation the order denying arbitration was applied to
them. AT&T then filed notices of appeal on those cases. We consolidated the appeals
pursuant to stipulation. Plaintiffs in the Meoli lawsuit as well as plaintiff Tucker have
filed a protective cross-appeal to challenge the trial court’s rejection of plaintiffs’ other
claims of unconscionability of the arbitration clause.
DISCUSSION
I. Injunctive Relief
All the plaintiffs seek, in addition to monetary recovery of the early termination
fees, injunctive relief to benefit the general public. However, the California Supreme
Court has held that such claims for injunctive relief are not arbitrable. (Cruz v.
PacifiCare Health Systems, Inc. (2003) 30 Cal.4th 303, 315-316 [UCL]; Broughton v.
Cigna Healthplans (1999) 21 Cal.4th 1066, 1079-1082 [CLRA].) AT&T conceded
below that the claims for injunctive relief were not arbitrable, and on appeal AT&T
acknowledges that this court is bound to follow Cruz and Broughton. We will, therefore,
affirm the trial court’s denial of AT&T’s petition to compel arbitration of the claims for
injunctive relief.
II. Monetary Claims
A. Nonsignatory Tucker
With one exception, plaintiffs subject to AT&T’s petition to compel arbitration are
parties to the arbitration clause in AT&T’s wireless service agreement.3 The one
exception is plaintiff Diane Tucker, who is not and never has been a subscriber to
3 We find it significant that of the eight named plaintiffs in the Marlowe lawsuit,
AT&T sought to compel arbitration only as to plaintiffs Marlowe and Lowinger, who are
subscribers to AT&T Wireless. In declining to compel arbitration as to the Marlowe
plaintiffs who are not AT&T customers—even though those plaintiffs also sued on behalf
of the general public under the UCL --AT&T has taken a position that is inconsistent
with its argument with respect to Tucker that a nonparty can be compelled to arbitrate.

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AT&T’s wireless service. She brought suit against AT&T solely as a private attorney
general under the UCL for the benefit of the general public.4
Plaintiff Tucker is before us in another appeal on a lawsuit brought in San Mateo
County against a different wireless telephone service provider. (Tucker v. Cingular
Wireless, A106671 [challenging rates].) We apply the same reasoning here as in that
related appeal and conclude that plaintiff Tucker cannot be compelled to arbitrate.
By statute, an order compelling arbitration is warranted when “an agreement to
arbitrate the controversy exists” and “a party thereto refuses to arbitrate such
controversy.” (Code Civ. Proc., § 1281.2.) The fundamental assumption of arbitration is
that the parties have consented to resolving their disputes outside the judicial process.
The strong policy favoring arbitration as a means of resolving disputes does not extend to
persons who are not parties to the arbitration agreement and have not elected to submit to
arbitration. (County of Contra Costa v. Kaiser Foundation Health Plan, Inc. (1996) 47
Cal.App.4th 237, 244-245; accord Benasra v. Marciano (2001) 92 Cal.App.4th 987,
990.) A proceeding to compel arbitration is essentially a suit in equity for specific
performance of an arbitration agreement. A court in equity has no power to compel third
party nonsignatories to arbitrate absent some implied authority by the signatory to bind
the nonsignatory. (47 Cal.App.4th at pp. 242-245; see also Marcus & Millichap Real
4 At the time of the proceedings below, section 17204 of the Business and
Professions Code provided in relevant part: “Actions for any relief pursuant to this
chapter shall be prosecuted exclusively in a court of competent jurisdiction by the
Attorney General or any district attorney or any [authorized] county counsel . . . or any
[qualified] city attorney . . . or by any person acting for the interests of itself, its members
or the general public.” (Bus. & Prof. Code, § 17204, italics added.)
While this appeal was pending, on November 2, 2004, the electorate amended the
UCL by Proposition 64 to delete the provision for a private attorney general. (2004
West’s Cal. Legis. Service, Prop. 64.) We find it unnecessary to examine the effect of
Proposition 64 upon the present appeal.
Whether Diane Tucker is entitled to pursue her claims under the UCL is not an
issue that is cognizable on AT&T’s petition to compel arbitration. AT&T’s assertions
that Diane Tucker now lacks standing and that her claims should be entirely dismissed
may be raised in the trial court by an appropriate motion.

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Estate Investment Brokerage Co. v. Hock Investment Co. (1998) 68 Cal.App.4th 83, 88-
89.)5
As discussed at length in County of Contra Costa v. Kaiser Foundation Health
Plans, Inc., supra, 47 Cal.App.4th at pages 242-245, a nonsignatory has been held bound
by an arbitration agreement in limited cases involving a preexisting relationship between
the nonsignatory and a party to the agreement.6 (E.g., Madden v. Kaiser Foundation
Hospitals (1976) 17 Cal.3d 699, 702, 704, 709 [insured employee bound by arbitration
clause in medical services contract entered into by employer]; Mormile v. Sinclair (1994)
21 Cal.App.4th 1508, 1511 [wife bound by arbitration clause in husband’s physician-
patient agreement]; Keller Construction Co. v. Kashani (1990) 220 Cal.App.3d 222
[general partner of the signatory limited partnership bound by arbitration clause in
construction agreement].) Here, no preexisting relationship exists between plaintiff
Tucker and the wireless telephone subscribers she purports to represent; there is no basis
for finding that the wireless subscribers had authority to bind plaintiff Tucker to the
arbitration agreement.
Net2Phone, Inc. v. Superior Court (2003) 109 Cal.App.4th 583, upon which
Cingular relies, is not on point. The question in that case was whether a forum selection
clause could be enforced against a plaintiff who was not a party to the telephone service
contract but who brought the action as a private attorney general under the UCL. We
draw a distinction between a forum selection clause and an arbitration clause. A forum
selection clause may be enforced against a nonparty who is “closely related to the
5 A nonsignatory third party may invoke an arbitration clause against a signatory
based upon equitable estoppel. (E.g., Alliance Title Co., Inc. v. Boucher (2005) 127
Cal.App.4th 262; Metalclad Corp. v. Ventana Environmental Organizational Partnership
(2003) 109 Cal.App.4th 1705.)
6 Another theory for binding a nonsignatory is the doctrine of incorporation by
reference. (E.g., Slaught v. Bencomo Roofing Co. (1994) 25 Cal.App.4th 744, 748-749
[arbitration clause in construction contract between property owner and general
contractor incorporated into subcontracts]; Boys Club of San Fernando Valley, Inc. v.
Fidelity & Deposit Co. (1992) 6 Cal.App.4th 1266, 1271-1274 [arbitration clause in
construction agreement incorporated into surety bond].)

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contractual relationship.” (Id. at pp. 587, 588; Lu v. Dryclean-U.S.A. of California, Inc.,
(1992) 11 Cal.App.4th 1490, 1493.) Enforcement of an arbitration clause, in contrast,
requires more than the nonparty’s connection to the contract. (E.g., Buckner v. Tamarin
(2002) 98 Cal.App.4th 140, 143 [father’s arbitration agreement with medical providers
did not bind his adult daughters on their wrongful death claims]; Benasra v. Marciano,
supra, 92 Cal.App.4th at p. 990 [arbitration agreement signed by corporation’s president
not binding on the individual in his claim for libel]; Kaneko Ford Design v. Citipark, Inc.
(1988) 202 Cal.App.3d 1220, 1229 [arbitration clause in contract between designer and
third party not binding on property owner].)
Our Supreme Court has left unresolved the question whether a plaintiff seeking
restitution as a private attorney general under the UCL can be compelled to arbitrate
when the plaintiff is not a party to the arbitration agreement but is acting on behalf of
injured consumers who are parties to the arbitration agreement. (Cruz v. PacifiCare
Health Systems, Inc., supra, 30 Cal.4th at p. 320, fn. 7.) We observe that the question has
little practical significance, because the same factors that preclude a private attorney
general from being compelled to arbitrate also serve to limit the plaintiff’s relief in court.
While civil penalties may be assessed when the action is initiated by a governmental
prosecutor (Bus. & Prof. Code, § 17206), monetary damages are not recoverable under
the UCL. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.) A private
plaintiff is limited to injunctive relief or restitution, i.e., the return of money obtained
through an unfair business practice (Bus. & Prof. Code, § 17203). And restitution
requires an ownership or vested interest in the money; nonrestitutionary disgorgement of
profits is not available to an individual acting as a private attorney general under the
UCL. (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1149-1152.)
As the Supreme Court explained, “The breadth of standing under this act allows any
consumer to combat unfair competition by seeking an injunction against unfair business
practices. Actual direct victims of unfair competition may obtain restitution as well.”
(Id. at p. 1152; italics added.) In the present case, plaintiff Tucker is not an actual direct
victim of AT&T Wireless’s early termination fee and is acting only as a private attorney

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general. She has no monetary remedies under the UCL, even assuming arguendo that her
claims remain viable. (See fn. 4, ante.) At most, her remedy is injunctive relief, and, as
we have said, the claims for injunctive relief are not arbitrable.
B. The Ban on Class Arbitration
(1) Unconscionability
An agreement to arbitrate is valid, irrevocable, and enforceable except when
grounds exist for the revocation of any contract. (Code Civ. Proc., §§ 1281, 1281.2,
subd. (b).)7 Unconscionability is one ground upon which a court may refuse to enforce a
contract (Civ. Code, § 1670.5), and the burden is on the party opposing arbitration to
prove the defense. (Engalla v. Permanente Medical Group, Inc., supra, 15 Cal.4th at p.
972.)
The determination of unconscionability is a question of law for the court. (Civ.
Code, § 1670.5, subd. (a); Flores v. Transamerica HomeFirst, Inc. (2001) 93 Cal.App.4th
846, 851.) On appeal, when the extrinsic evidence is undisputed, as it is here, we review
the contract de novo to determine unconscionability. (93 Cal.App.4th at p. 851; Stirlen v.
Supercuts, Inc. (1997) 51 Cal.App.4th 1519, 1527.)
It bears emphasizing that a finding of unconscionability in a contract clause does
not necessarily mean that the contract cannot be enforced. The trial court has discretion
to sever the unconscionable provision and enforce the remainder of the contract or to
limit the application of the unconscionable clause so as to avoid an unconscionable result.
(Civ. Code, § 1670.5, subd. (a); Little v. Auto Stiegler, Inc. (2003) 29 Cal.4th 1064, 1074-
1075.) Here, AT&T argued below and continues to assert that the provision is an integral
part of the arbitration agreement and cannot be severed.
In determining whether a particular contractual provision is unconscionable, we
examine both a procedural and a substantive element of unconscionability. The
7 The statutory reference to grounds for revocation of an agreement is a misnomer;
the issue on a motion to compel arbitration is whether there are grounds to rescind the
arbitration agreement. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th
951, 973.)

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procedural element focuses on the way in which the disputed provision was presented--
i.e., whether there was “oppression” or “surprise.” Oppression arises from an inequality
of bargaining power that results in no real negotiation and an absence of meaningful
choice. Surprise involves the extent to which the supposedly agreed-upon terms are
hidden in a prolix printed form drafted by the party seeking to enforce them. The
substantive element of unconscionability has to do with the effects of the contractual
provision and whether it is overly harsh or one-sided. (Armendariz v. Foundation Health
Psychcare Services, Inc (2000) 24 Cal.4th 83, 114 (Armendariz); A & M Produce Co. v.
FMC Corp. (1982) 135 Cal.App.3d 473, 486.)
To be unenforceable, a contract must be both procedurally and substantively
unconscionable, but the courts employ a “sliding scale” or a balancing relationship
between the two elements of unconscionability, such that the greater the degree of unfair
surprise or unequal bargaining power, the less the degree of substantive unconscionability
required to annul the contract and vice versa. (Armendariz, supra, 24 Cal.4th at p. 114;
Marin Storage & Trucking, Inc. v. Benco Contracting & Engineering, Inc. (2001) 89
Cal.App.4th 1042, 1056.)
We agree with the trial court’s conclusion that the arbitration agreement, included
in the box along with the telephone, was a contract of adhesion and, hence, procedurally
unconscionable. (See Flores v. Transamerica HomeFirst, Inc., supra, 93 Cal.App.4th at
p. 853; Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at pp. 1533-1534.) The more
difficult question is whether the ban on class arbitration is substantively unconscionable.
That issue was addressed in Szeleta, supra, 97 Cal.App.4th 1094. There the
plaintiff was a credit card holder who alleged that the bank (credit card company) had
improperly charged him a $29 fee for exceeding his credit limit. The arbitration clause in
the credit card agreement prohibited joining or consolidating claims in arbitration or
arbitrating claims as a representative, as a member of a class, or as a private attorney
general. When the plaintiff brought a class action, the bank successfully moved to
compel arbitration on an individual basis. The appellate court held the ban on class

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treatment to be unconscionable, and the court directed the trial court to proceed to
arbitration on a class basis.
The Szeleta court reasoned that the ban on class arbitration was unfairly one-sided:
“Although styled as a mutual prohibition on representative or class actions, it is difficult
to envision the circumstances under which the provision might negatively impact
Discover, because credit card companies typically do not sue their customers in class
action lawsuits. This provision is clearly meant to prevent customers . . . from seeking
redress for relatively small amounts of money, such as the $29 sought by Szeleta. Fully
aware that few customers will go to the time and trouble of suing in small claims court,
Discover has instead sought to create for itself virtual immunity from class or
representative actions despite their potential merit, while suffering no similar detriment to
its own rights.” (Szeleta, supra, 97 Cal.App.4th at p. 1101.)
The lack of mutuality is, of course, a basis for finding substantive
unconscionability. (Armendariz, supra, 24 Cal.4th at pp. 117-121.) The courts have
found unconscionable a clause requiring arbitration for the weaker party while giving the
stronger party a choice of forum. (Id. at pp. 120-121 [only employee’s claims of
wrongful termination subject to arbitration]; Little v. Auto Stiegler, Inc., supra, 29 Cal.4th
at p. 1073 [allowing appeal of any award over $50,000 effectively gave only employer
right to appeal]; Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1407-1408 [personal
injury damages not available without contractor’s consent]; Flores v. Transamerica
HomeFirst, Inc., supra, 93 Cal.App.4th at p. 855 [only borrower’s claims subject to
arbitration while lender had remedy of foreclosure].)8
In the present case, the ban on class-wide arbitration does tend to favor AT&T.
The obvious effect is to limit the scope of potential damages that AT&T would face in
8 Not every instance of one-sidedness is invalid: “[A] contract can provide a
‘margin of safety’ that provides the party with superior bargaining strength a type of extra
protection for which it has a legitimate commercial need without being unconscionable.”
(Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at p. 1536; accord, Armendariz, supra,
24 Cal.4th at p. 117.)

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class arbitration without the ability to obtain judicial review. Yet, the ban on class
arbitration does not affect the choice of forum. Class actions through litigation are
necessarily precluded by the agreement to arbitrate. The limitation is only on the breadth
of the arbitration proceeding--i.e., the manner in which the arbitration is to occur. And
the limitation in the present case is materially different from the clause in Szetela. The
arbitration clause here expressly permits the customers to obtain relief in small claims
court.9 Moreover, the cost to the customer is limited to $25 on claims under $1,000;
AT&T will pay all other administrative costs and fees. In contrast to the credit card
customers in Szetela, AT&T’s subscribers are not deterred from seeking redress for small
amounts. Under these circumstances, we do not find the arbitration clause so one-sided
or unreasonable to be substantively unconscionable.
(2) Impairment of Statutory Rights
The Supreme Court has recognized two distinct defenses to a motion to compel
arbitration: (1) the arbitration agreement is unconscionable, and (2) arbitration would
compel the claimant to forfeit certain statutory rights. (Armendariz, supra, 24 Cal.4th at
p. 113; Gutierrez v. Autowest, Inc. (2003) 114 Cal.App.4th 77, 86.) The parties here have
not made a distinction between the two defenses but have treated the latter as a version of
unconscionability. We treat the two defenses separately.
It is now well settled that even claims arising under a statute designed to further
important social policies may be arbitrated. (Green Tree Fin. Corp.-Ala. v. Randolph
(2000) 531 U.S. 79, 90; Cruz v. PacifiCare Health Systems, Inc., supra, 30 Cal.4th at p.
317 [UCL]; Broughton v. Cigna Healthplans, supra, 21 Cal.4th at p. 1084 [CLRA].) But
arbitration will be denied if the prospective litigant is precluded from fully vindicating
the statutory cause of action in the arbitral forum. (531 U.S. at p. 90; Armendariz, supra,
24 Cal.4th at pp. 99-104.) In Armendariz, the claimant/employees sued for sexual
9 Oddly, the Szetela court seems to have presumed that the credit cardholders were
free to go to small claims court but would be unlikely to do so. Yet, the arbitration clause
in that case withdrew the right to litigate any claim in court. (Szeleta, supra, 97
Cal.App.4th at p. 1096.)

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harassment under FEHA, but the arbitration clause in their employment contract confined
the potential relief to back pay and precluded recovery of punitive damages and attorney
fees--recovery that would otherwise have been available under FEHA. The Supreme
Court held that the limitation on remedies was unlawful as it would prevent the
employees’ full vindication of their rights under FEHA. (See also Stirlen v. Supercuts,
Inc., supra, 51 Cal.App.4th at pp. 1539-1540 [limit on remedies under several statutes];
Graham Oil v. ARCO Products Co. (9th Cir. 1994) 43 F.3d 1244, 1248 [limit on
remedies that would be available under Petroleum Marketing Practices Act].)
Plaintiffs apparently rely upon this principle in emphasizing that consumer class
actions are given statutory protection. Under the CLRA, class actions are specifically
permitted (Civ. Code, §§ 1752, 1781), and any purported contractual waiver of rights
granted by the CLRA is invalid (Civ. Code, § 1751). Also, at the time of the events here,
the UCL allowed consumers to redress unfair business practices through private attorney
general actions. (Bus. & Prof. Code, § 17204; see fn. 4, ante.)
The Szeleta court apparently relied upon this principle, too, in finding that the
contractual ban on class arbitration violates public policy. The Szeleta court reasoned
that the ban would undermine consumer protection statutes by eliminating the private
attorney general mechanism: “[The clause] contradicts the California Legislature’s stated
policy of discouraging unfair and unlawful business practices, and of creating a
mechanism for a representative on behalf of the general public as a private attorney
general. (See, e.g., Bus. & Prof. Code, § 17200 et seq.) It provides the customer with no
benefit whatsoever; to the contrary, it seriously jeopardizes customers’ consumer rights
by prohibiting any effective means of litigating Discover [Bank’s] business practices.
This is not only substantively unconscionable, it violates public policy by granting
Discover [Bank] a ‘get out of jail free’ card while compromising important consumer
rights.” (Szeleta, supra, 97 Cal.App.4th at p. 1101.)
We cannot agree that the ban on class arbitration immunizes businesses from
consumer protection lawsuits. The arbitration clause has no effect on actions by the
Attorney General or other governmental prosecutors to redress unfair business practices.

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(EEOC v. Waffle House, Inc. (2002) 534 U.S. 279; see Gilmer v. Interstate/Johnson Lane
Corp. (1991) 500 U.S. 20, 32.) Nor does the ban on class arbitration do anything to limit
litigation. The customer’s right to litigate has already been curtailed by the arbitration
agreement itself. As we have said, monetary claims under the UCL and CLRA are
arbitrable even though such claims vindicate important statutory rights. What is
restricted here is the breadth or manner of arbitration and the ability to pursue the claims
of others within the arbitration.
There is no statutory right to class arbitration. Class arbitration has been held
permissible when the trial court, in the exercise of its discretion, finds that the interests of
justice require class-wide relief. (Keating v.Superior Court (1982) 31 Cal.3d 584, 609-
614, reversed on other grounds sub nom. Southland Corp. v. Keating (1984) 465 U.S. 1;
Blue Cross of California v. Superior Court (1998) 67 Cal.App.4th 42, 64; see Green Tree
Financial Corp. v. Bazzle (2003) 539 U.S. 444; Cruz v. PacifiCare Health Systems, Inc.,
supra, 30 Cal.4th at pp. 318-319.) However, judicial recognition of a class-wide remedy
in arbitration cannot be equated with a nonwaivable statutory right. Indeed, a
nonwaivable right to class arbitration would undermine the purpose of arbitration.
Arbitration is meant to resolve private disputes in an expeditious and efficient manner,
not to remedy a public wrong. (Broughton v. Cigna Healthplans, supra, 21 Cal.4th at p.
1080.) The fact that the procedural device of class treatment is not available in
arbitration is “part and parcel of arbitration’s ability to offer ‘simplicity, informality, and
expedition’ [citing Gilmer v. Interstate/Johnson Lane Corp., supra, 500 U.S. at p. 31],
characteristics that generally make arbitration an attractive vehicle for the resolution of
low-value claims.” (Iberia Credit Bureau, Inc. v. Cingular Wireless (5th Cir. 2004) 379
F.3d 159, 174.)
C. Other Claims of Unconscionability
The cross-appeal by plaintiffs requires that we examine the other claims of
unconscionability to determine whether the trial court’s order denying arbitration may be
affirmed on some other ground. We conclude that the arbitration clause is not
substantively unconscionable in any respect.

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(1) Mutuality
The early versions of the arbitration clause provided in pertinent part as follows:
“Binding Arbitration. This provision is intended to be interpreted broadly to encompass
all disputes or claims arising out of our relationship. Any dispute or claim made by you
against us . . . arising out of or relating to this Agreement . . . (whether based in contract,
tort, statute, fraud, misrepresentation or any other legal theory) will be resolved by
binding arbitration except that (1) you may take claims to small claims court if they
qualify for hearing by such a court, or (2) you or we may choose to pursue claims in court
if the claims relate solely to the collection of any debts you owe to us.” (Italics added.)10
Plaintiffs focus on the phrase “any dispute or claim made by you against us” to
assert that the arbitration clause requires only the customer to arbitrate disputes, leaving
AT&T free to bring its claims to court. From this reading of the arbitration clause,
plaintiffs contend the arbitration clause lacks mutuality.
We cannot agree with plaintiffs’ interpretation of the arbitration clause. The
phrase in question seems to be in the nature of an alert to the customer that the
customer’s claims will be arbitrated; it does not exclude AT&T’s own claims from
arbitration. Indeed, other language in the arbitration clause indicates that AT&T’s
claims, too, will be arbitrated. The exception for debt collection states that “you or we
may choose to pursue [debt collection] claims in court ….” (Italics added.) The words
“or we” would be unnecessary if all of AT&T’s claims could be litigated. Moreover,
language later in the clause states: “By this agreement, both you and we are waiving
certain rights to litigate disputes in court.” This language confirms that the obligation to
arbitrate is mutual.
(2) Cost Sharing
Plaintiffs argue that the early two-tiered and later three-tiered arrangements for
allocation of costs are unconscionable, because the customer faces the possibility of
substantial fees. We cannot agree.
10 The later version omits the italicized phrase.

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First, we reject plaintiffs’ implicit assertion that consumers cannot be required to
pay any costs of arbitration. Plaintiffs rely on Armendariz, supra, 24 Cal.4th 83, in which
the Supreme Court held that when an employer imposes mandatory arbitration as a
condition of employment, the employee cannot be required to bear any type of expense
that is unique to arbitration and that the employee would not have to bear, were he free to
bring his case to court. (Id. at pp. 107-113.) Accordingly, the court interpreted the
contract that was otherwise silent on the issue to mean that the employer must bear all
costs of arbitration. (Id. at p. 113.)
That “categorical” approach differs from the approach taken by the United States
Supreme Court in a consumer arbitration case, Green Tree Fin. Corp.-Ala. v. Randolph,
supra, 531 U.S. 79. In the face of a silent agreement, the court held that a party could
seek to invalidate an arbitration agreement on the ground that the costs of arbitration
would be “prohibitively expensive,” but the consumer in that case failed to prove the
likelihood that the costs would be so. (531 U.S. at pp. 90, 92.) Subsequent decisions
have characterized the Green Tree approach as necessitating a case-by-case analysis.
(Gutierrez v. Autowest, Inc., supra, 114 Cal.App.4th at p. 96.)11
The California Supreme Court has not yet ruled on the allocation of costs in a
consumer arbitration, but we have concluded that the case-by-case approach should be
used in consumer cases. (Gutierrez v. Autowest, Inc., supra, 114 Cal.App.4th at pp. 96-
98.) In Guitierrez, the claimant established an inability to pay the up-front administrative
fees, and we held the fee division provision unconscionable where the arbitration
agreement provided no avenue for relief from unaffordable fees. (Id. at pp. 89-92.) The
present case is markedly different. Plaintiffs here have made no showing that the costs of
arbitration would be prohibitively expensive. In fact, the arbitration clause limits a
customer’s total costs to $25 on a claim under $1,000, and the trial court found that $25 is
equivalent to the filing fee in small claims court. Only on claims in excess of $75,000 (or

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$1,000 under the earlier version) is there a chance that the customer will be ordered to
pay costs of arbitration above what the customer would pay to bring a lawsuit. Yet,
because we have concluded that the arbitration must proceed on an individual basis, there
is no discernible possibility that any of the plaintiffs would have a claim for recovery of
an early termination fee in such large amounts. In any event, in a consumer arbitration
proceeding, a consumer who can establish indigency is entitled to a waiver of all costs.
(Code Civ. Proc., § 1284.3, subd. (b).) We find nothing overly harsh or unfair in the
provision relating to costs in arbitration.
(3) Confidentiality
The early version of the arbitration clause contained a provision requiring the
parties to keep confidential the outcome of any arbitration proceeding. That
confidentiality provision was entirely omitted from the later version in 2003. Even
assuming arguendo that the confidentiality provision is unconscionable, we agree with
AT&T that the provision is readily severable from the remainder of the arbitration
agreement.
The trial court has authority to sever an unconscionable provision and enforce the
remainder of the contract or to limit the application of the unconscionable clause so as to
avoid an unconscionable result. (Civ. Code, § 1670.5, subd. (a); Little v. Auto Stiegler,
Inc., supra, 29 Cal.4th at pp. 1074-1075.) “If the illegality is collateral to the main
purpose of the contract, and the illegal provision can be extirpated from the contract by
means of severance or restriction, then such severance and restriction are appropriate.”
(Armendariz, supra, 24 Cal.4th at p. 124.) Here, the confidentiality provision is a single,
discrete provision that is not integral to the arbitration agreement. The offending
provision can be stricken without affecting the rest of the arbitration agreement.
11 In Little v. Auto Stiegler, Inc., supra, 29 Cal.4th at pages 1081-1085, the California
Supreme Court recognized the difference in the two approaches and affirmed its
categorical approach in mandatory employment arbitration.

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(4) Limitations Period
The later version of the arbitration agreement contains a provision that imposes a
two-year limitation period on claims against AT&T, whether brought in court or in the
arbitral forum. Plaintiffs contend that because this two-year limitations period shortens
the three-year-period under the CLRA (Civ. Code, § 1783) and the four-year period
under the UCL (Bus. & Prof. Code, § 17208), the provision is unconscionable.
The contractual provision shortening the limitation period was not placed in the
wireless service agreement until 2003, and all of the lawsuits filed here were timely under
the two-year limit. There is no justiciable controversy here.
In any event, the provision is not unconscionable. Parties may agree by contract to
shorten the limitations period otherwise provided by the statute of limitations as long as
the shortened period is itself reasonable. (Beeson v. Schloss (1920) 183 Cal. 618, 622;
Hambrecht & Quist Venture Partners v. American Medical Internat., Inc. (1995) 38
Cal.App.4th 1532, 1548; West v. Henderson(1991) 227 Cal.App.3d 1578, 1585, 1588.)
Plaintiffs rely on Stirlen v. Supercuts, Inc., supra, 51 Cal.App.4th at page 1542, that held
a one-year limitation period in an employment agreement, when taken with other
unilateral restrictions on the employee’s remedies, to be unconscionable. The limitation
period here, of course, is two years, not one, and we have not found any other provision
to be unduly harsh. Plaintiffs have made no showing that the two-year limit
unreasonably forecloses relief.
(5) Neutral Arbitrator
Plaintiffs contend that because the arbitration is governed by the wireless industry
arbitration rules there is a risk that the arbitrator will not be neutral. This lack of
neutrality assertedly comes from the fact that the wireless industry arbitration rules call
for selection of an arbitrator from a limited panel of telecommunications specialists.
Plaintiffs reason that AT&T will have the benefit of being a “repeat player” in front of
the telecommunications panel, gaining knowledge of individual arbitrators’ style,
preferences, and methods.

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The trial court acknowledged the risk but found only minimal potential for harm to
the customers because the customers retain the ability to go to small claims court. We
agree. In any event, plaintiffs acknowledge that the method for selecting the arbitrator is
not itself substantively unconscionable; plaintiffs contend only that it is unconscionable
when accompanied by the other unconscionable provisions. We do not find any other
provision unconscionable.
DISPOSITION
The order denying the petition to compel arbitration is affirmed as to plaintiff
Diane Tucker. As to the remaining plaintiffs, the order is reversed in part, and the trial
court is directed to enter a new order compelling arbitration of the monetary claims on an
individual basis. With respect to the claims for injunctive relief, the order denying
arbitration is affirmed. The parties shall bear their own costs on appeal.
_________________________
Jones, P.J.
We concur:
________________________
Stevens, J.
________________________
Simons, J.

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