Saperstein v. Thomas P. Gohagan & Company

Background

Guy Saperstein brought a putative class action against Thomas P. Gohagan & Company (Gohagan). He alleged breach of contract, breach of the duty of good faith and fair dealing, intentional misrepresentation, unjust enrichment, and violations of California’s Unfair Competition Law. The claims arose from Gohagan’s cancellation of a European cruise during the COVID-19 pandemic and its refusal to refund the money Saperstein had paid.

Saperstein had signed a cruise reservation form and paid a deposit. The form stated that reserving and depositing for the program meant agreeing to the binding arbitration agreement printed on the back cover of the brochure. That agreement required disputes concerning the contract, the brochure, or the trip to be resolved exclusively by binding arbitration in Chicago, Illinois. It also stated that the arbitrator, rather than a court or government agency, had exclusive authority to decide disputes about the contract’s interpretation, applicability, enforceability, unconscionability, or formation. “Unconscionability” is a legal term for contract terms or contracting circumstances that are so unfair that a court may refuse to enforce them.

Arguments

Gohagan moved to compel arbitration and to dismiss or stay the case. It argued that Saperstein signed an agreement to arbitrate and that all of his claims fell within the agreement’s broad language.

Saperstein did not dispute signing the reservation form or that his claims fell within the arbitration provision. Instead, he argued that the agreement was unconscionable under California law. He contended that the contract was procedurally unfair because it was presented on a take-it-or-leave-it basis and the arbitration terms appeared on the back of the brochure. He also argued that the agreement was substantively unfair because it allegedly lacked mutuality and required arbitration in Chicago. Separately, he argued that enforcing the provision would violate California’s rule protecting claims for public injunctive relief.

Court’s Analysis

Under the Federal Arbitration Act, a court generally determines whether a valid arbitration agreement exists and whether the dispute falls within its scope. The court explained that the parties may instead clearly and unmistakably delegate gateway questions of arbitrability—threshold questions about whether arbitration applies—to an arbitrator.

The court found that Gohagan proved, by a preponderance of the evidence, that Saperstein agreed to the arbitration provision. Saperstein signed a form expressly incorporating the arbitration agreement, and the agreement covered disputes relating to the trip and contract.

The court then applied the Supreme Court’s decision in Rent-A-Center, West, Inc. v. Jackson. Under that decision, when a contract delegates questions about the arbitration agreement’s validity to the arbitrator, a court considers a challenge directed specifically at that delegation clause. A challenge to the arbitration agreement as a whole is for the arbitrator unless the delegation clause itself is separately shown to be invalid.

The court concluded that Saperstein had not specifically shown that the delegation clause was unconscionable. His arguments about a lack of mutuality, the contract’s cancellation provision, and arbitration in Chicago challenged the broader arbitration arrangement rather than the delegation clause itself. The court also rejected his argument that the Chicago requirement was substantively unconscionable, relying on the stated justification of consolidating disputes in one forum. Because Saperstein had not shown substantive unconscionability, the court did not address his procedural-unconscionability arguments.

The court also held that Saperstein had not shown a violation of California’s rule concerning public injunctive relief. The arbitration provision did not state that public injunctive relief was unavailable, and Saperstein did not explain how the provision would prevent such relief. The court stated that, to the extent Saperstein sought public injunctive relief, an arbitrator could decide whether to award it.

Disposition

The court granted Gohagan’s motion to compel arbitration and stayed the case pending arbitration. It stated that if the arbitrator determines that the arbitration agreement is invalid or unenforceable, or that some aspect of Saperstein’s claims should be litigated in court, either party may move to dismiss the action after arbitration reaches a complete resolution. The court also set a status conference and required a joint report on the arbitration’s status.