Doucette v. Neutron Holdings, Inc.

• Court: District of Columbia Court of Appeals
• Decided: January 26, 2023
• Docket: 21-CV-896
• Status: Published

Opinion

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DISTRICT OF COLUMBIA COURT OF APPEALS

No. 21-CV-896

ADORIA DOUCETTE, APPELLANT,

v.

NEUTRON HOLDINGS, INC., APPELLEE.

Appeal from the Superior Court of the District of Columbia (2020-CA-005118-B)

(Hon. Hiram E. Puig-Lugo, Trial Judge)

(Argued November 16, 2022 Decided January 26, 2023)

Anthony Graham, Sr. for appellant.

John A. Nader for appellee. Russell S. Drazin was on the brief for appellee.

Before BECKWITH and MCLEESE, Associate Judges, and GLICKMAN, * Senior Judge.

MCLEESE, Associate Judge: Appellant Adoria Doucette sued appellee

Neutron Holdings, Inc. (doing business as Lime), alleging that she was injured in a

* Judge Glickman was an Associate Judge of the court at the time of argument. He began his service as a Senior Judge on December 21, 2022. 2

scooter accident as a result of Lime’s negligence. Ms. Doucette challenges an order

compelling her to arbitrate her claim. We affirm.

I. Factual and Procedural Background

The complaint alleges that Ms. Doucette rented one of Lime’s electric

scooters, the scooter’s brakes failed, Ms. Doucette collided with a person riding a

bicycle, and Ms. Doucette fractured her leg and suffered other injuries. The

complaint further alleges that the collision was caused by Lime’s negligence.

Lime filed a motion to compel arbitration, relying on an arbitration agreement

that Ms. Doucette accepted when she rented the scooter. Ms. Doucette opposed the

motion, arguing that the arbitration agreement is unconscionable and that the trial

court had the authority to decide that issue. Specifically, Ms. Doucette argued that

the arbitration agreement is a contract of adhesion and that various terms in the

contract are so unreasonable as to render the contract unenforceable.

The trial court ruled that the arbitration agreement is not unconscionable.

Applying factors set out in Keeton v. Wells Fargo Corp., 987 A.2d 1118, 1123 (D.C.

2010), the trial court explained that the arbitration agreement binds both parties, the 3

arbitration would be conducted by a neutral party, and the costs of arbitration would

depend on the outcome of the arbitration. See id. (listing issues “central to a proper

determination of unconscionability,” including “the significance of the imbalance of

power in arbitrator selection . . . , the fact that the [arbitration] clause reserves some

litigation avenues to [the corporate entity] while entirely barring [the consumer]

from seeking judicial action, as well as the costs imposed on [the consumer] by the

arbitration procedure and their impact on [the consumer’s] ability to seek redress”).

The trial court therefore stayed Ms. Doucette’s suit and granted the motion to compel

arbitration.

II. Appellate Jurisdiction

The parties agree that we have jurisdiction to review the trial court’s order

compelling arbitration. See D.C. Code § 16-4427(a)(1) (authorizing appeal from

order granting motion to compel arbitration); Woodroof v. Cunningham, 147 A.3d

777, 780-87 (D.C. 2016) (holding that § 16-4427 permits appeals of orders

compelling arbitration). We agree, but we briefly address one complication. The

arbitration agreement in this case provides that the Federal Arbitration Act (FAA),

9 U.S.C. § 1 et seq., will govern the arbitrability of disputes arising out of the

contract between Ms. Doucette and Lime. The FAA generally does not permit 4

immediate appeal from orders compelling arbitration. 9 U.S.C. § 16(b)(2)

(precluding interlocutory appeals from orders “directing arbitration to proceed

under” 9 U.S.C. § 4). We conclude, however, that the question of appealability is

governed by the law of this jurisdiction rather than by § 16(b)(2). Section 16(b)(2)

refers to orders directing arbitration to proceed under 9 U.S.C. § 4. Section 4 refers

to proceedings before a “United States district court.” This action was filed in

Superior Court, not federal district court, so the FAA provisions relating to

appealability by their terms do not apply to this proceeding. See, e.g., Wells v. Chevy

Chase Bank, F.S.B., 768 A.2d 620, 624-29 (Md. 2001) (appealability of order

compelling arbitration governed by Maryland procedural rules, not by FAA) (citing

cases).

III. Unconscionability

Ms. Doucette renews her argument that the arbitration agreement is

unconscionable. We affirm the trial court’s contrary holding.

We note a threshold issue. Ms. Doucette argues that the question whether the

arbitration agreement is unconscionable was for the trial court to decide. Lime

argues that that question should have been left to the arbitrator to decide. We need 5

not resolve that dispute. The trial court resolved the question of the

unconscionability of the arbitration agreement favorably to Lime, and we uphold

that ruling. Lime has not asked us to set aside that ruling.

A party may avoid enforcement of a contract that is unconscionable because

the contract is “oppressive and plainly one-sided.” Simon v. Smith, 273 A.3d 321,

331 (D.C. 2022). “Unconscionability of a contract is ultimately a legal conclusion,

dependent on proof and findings of facts supporting such a determination.” Id. We

defer to the trial court’s findings of fact unless they are clearly erroneous or

unsupported by the record, but “we review de novo the trial court’s ultimate holding

that a contract is unconscionable.” Id.

A contract is unconscionable if there is “an absence of meaningful choice on

the part of one of the parties” (procedural unconscionability) and “the contractual

terms are unreasonably favorable to the other party” (substantive unconscionability).

Smith, 273 A.3d at 331 (internal quotation marks omitted). “Generally, we require

that the party seeking to avoid the contract prove both” procedural and substantive

unconscionability. Id. “In an egregious situation, however, a showing of one or the

other may suffice.” Id. at 331 n.15 (brackets and internal quotation marks omitted). 6

The trial court in this case focused its inquiry on the potential

unconscionability of the agreement to arbitrate rather than of the contract as a whole.

We agree with the trial court’s focus, which Ms. Doucette does not appear to

challenge directly. Cf., e.g., Rent-A-Center, W., Inc. v. Jackson, 561 U.S. 63, 70-72

(2010) (under FAA, valid agreement to arbitrate is enforceable even if other parts of

contract may be unconscionable).

We also agree with the trial court that the agreement to arbitrate in this case

is not unconscionable. As the trial court noted, both parties are equally obligated to

arbitrate their claims, with no avenues for litigation reserved to Lime alone; the

arbitration would be conducted by a neutral entity; and the cost of the arbitration

would be borne by the losing party, not specifically by Ms. Doucette. For the same

reasons, we conclude the arbitration agreement is not unconscionable. Cf., e.g.,

Purvis v. Mar-Jac Poultry MS, LLC, 345 So. 3d 1223, 1230-31 (Miss. Ct. App. 2022)

(agreement to arbitrate was not unconscionable where “all terms in the arbitration

clause were equally applicable to both parties” and no party “had any advantage or

disadvantage in the arbitration process”); Metzgar v. Star Pontiac, Inc., 75 Pa. D. &

C.4th 114, 119-20 (Ct. Comm. Pl. 2005) (agreement to arbitrate was not

unconscionable where agreement required both parties to arbitrate, did not impose

excess costs on either party, and was “neutral on its face”); Phillips v. Neutron 7

Holdings, Inc., No. 3:18-CV-3382-S, 2019 WL 4861435, at *6 (N.D. Tex. Oct. 2,

2019) (enforcing identical arbitration agreement); Osvatics v. Lyft, Inc., 535 F. Supp.

3d 1, 10-12 (D.D.C. 2021) (finding similar arbitration agreement enforceable under

FAA). See generally AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 346-47

(2011) (discussing general policy against judicial interference with validly entered

arbitration agreements, even if agreements are contained in consumer contracts of

adhesion).

We are not persuaded by Ms. Doucette’s contrary arguments. Primarily, Ms.

Doucette focuses on general provisions of the contract, not those specifically

addressing arbitration. For example, Ms. Doucette points to the contract’s

prohibition of class-action suits, Lime’s reservation of rights to not offer refunds

except in its sole discretion, Lime’s release of itself and contractors from damages,

the contractual cap on damages, and Lime’s ability to unilaterally terminate the

consumer’s right to use Lime’s services. Whether parts of the contract not related

to the agreement to arbitrate are unconscionable is a question that can be decided by

the arbitrator pursuant to the parties’ enforceable agreement to arbitrate. See Rent-

A-Center, 561 U.S. at 68-70 (parties may validly agree to arbitrate questions such as

unconscionability, and “a party’s challenge to another provision of the contract, or 8

to the contract as a whole, does not prevent a court from enforcing a specific

agreement to arbitrate”).

Ms. Doucette makes several arguments that apply more directly to the

agreement to arbitrate, but we are not persuaded by those arguments. First, Ms.

Doucette argues that the agreement to arbitrate is part of a contract of adhesion. See

generally, e.g., Andrew v. Am. Imp. Ctr., 110 A.3d 626, 633 n.8 (D.C. 2015) (“A

contract of adhesion is defined generally as one imposed upon a powerless party,

usually a consumer, who has no real choice but to accede to its terms.”) (internal

quotation marks omitted). The trial court ruled that the contract at issue in this case

is a contract of adhesion, and we assume the correctness of that ruling for purposes

of this decision. A contract is not unconscionable, however, simply because the

contract is one of adhesion. See, e.g., Andrew, 110 A.3d at 636-39 (remanding for

evidentiary hearing on question of unconscionability after determining that

agreement at issue was contract of adhesion).

Second, Ms. Doucette argues that the arbitration agreement states the FAA

governs the agreement but does not provide a copy of the FAA or explain what the

FAA means. The lack of further detail or elaboration on this choice-of-law provision

does not render the agreement unconscionable, especially when information about 9

the FAA is easily obtainable. Cf. Forrest v. Verizon Commc’ns, Inc., 805 A.2d 1007,

1010-11 (D.C. 2002) (holding that forum-selection clause in consumer agreement

was enforceable when reasonably communicated to user, and explaining that notice

need not explain “possible jurisprudential consequences of a forum selection

clause”).

Third, the arbitration agreement requires Ms. Doucette to bring a claim within

one year, rather than permitting suit under the otherwise applicable statute of

limitations, which Ms. Doucette contends would be three years. We hold that this

time limit does not make the arbitration agreement as a whole unconscionable. Time

limits can render arbitration agreements unconscionable if the limits are “clearly

unreasonable and unduly favorable” to the drafter. Nino v. Jewelry Exch., Inc., 609

F.3d 191, 202 (3d Cir. 2010) (finding five-day time limit to preserve opportunity to

arbitrate substantively unconscionable) (internal quotation marks omitted). A

number of courts have found a time limit of one year in an arbitration agreement to

be reasonable. See, e.g., Mr. Sandless Franchise, LLC v. Karen Cesaroni LLC, 498

F. Supp. 3d 725, 736 (E.D. Pa. 2020) (citing cases); Curtis v. Marino, 201 A.D.3d

584, 585 (N.Y. App. Div. 2022) (“The contractual shortening of the statute of

limitations . . . to one year is inherently reasonable.”) (internal quotation marks

omitted; citations omitted). See generally Ord. of United Com. Travelers of Am. v. 10

Wolfe, 331 U.S. 586, 608 (1947) (noting that parties may contract for shorter period

to bring action than provided by applicable statute of limitations, as long as that

period is “reasonable”).

There are decisions finding a time limit of a year to be unconscionable in at

least some circumstances, for example where the time limit conflicted with a longer

statute of limitations provided by a remedial statute. See, e.g., Mills v. Facility

Solutions Grp., 300 Cal. Rptr. 3d 833, 854 (Ct. App. 2022) (citing cases involving

claims arising under wage and labor laws); Pinela v. Neiman Marcus Grp., Inc., 190

Cal. Rptr. 3d 159, 182 (Ct. App. 2015) (“Where . . . arbitration agreements

undermine statutory protections, courts have readily found unconscionability.”)

(internal quotation marks omitted). Ms. Doucette has not relied on such cases,

however, and the rationale of such cases does not appear to extend to common-law

claims like Ms. Doucette’s that are not brought under a specific remedial statute. In

light of the foregoing, we conclude that the time limit in the agreement does not

render the agreement to arbitrate as a whole invalid. To be clear, we do not decide

the related but distinct question whether the time limit itself is enforceable; we leave

that issue to the arbitrator if the issue is raised in that forum. Cf., e.g., Kristian v.

Comcast Corp., 446 F.3d 25, 43-44 (1st Cir. 2006) (leaving to arbitrator question of

enforceability of time limit in arbitration agreement). 11

Finally, Ms. Doucette contends that the arbitration agreement is

unconscionable because the agreement denies Ms. Doucette the rights to have a trial

court resolve her claims and to appeal from that ruling, instead substituting a

decision by an arbitrator subject to very limited judicial review. Those

consequences, however, are intrinsic features of arbitration. District of Columbia

law permits arbitration agreements and requires their enforcement when valid,

subject to very limited judicial review. D.C. Code § 16-4401 et seq. That

legislatively established system cannot be invalidated under the common-law

doctrine of unconscionability. See Archie v. U.S. Bank, N.A., 255 A.3d 1005, 1015

(D.C. 2021) (unconscionability is common-law defense to enforcement of

contracts); D.C. Pub. Emp. Rels. Bd. v. Fraternal Ord. of Police, 987 A.2d 1205,

1209 (D.C. 2010) (discussing District of Columbia’s “clear policy in favor of

enforcing arbitration agreements”); cf. Fla. Holdings III, LLC v. Duerst ex rel.

Duerst, 198 So. 3d 834, 843 (Fla. Dist. Ct. App. 2016) (rejecting claim of

unconscionability that “boils down to a quarrel with two standard features of

arbitration—the fact that it involves more limited discovery than civil litigation and

the fact that it affords more limited rights of judicial review than civil litigation”). 12

For the foregoing reasons, the judgment of the Superior Court is affirmed.

So ordered.