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J. A38007/01
2002 PA Super 327
ROBERT E. LYTLE AND JUDITH LYTLE, : IN THE SUPERIOR COURT OF
Appellants :
PENNSYLVANIA
:
v.
:
:
CITIFINANCIAL SERVICES, INC., f/k/a :
COMMERCIAL CREDIT PLAN :
CONSUMER DISCOUNT COMPANY,
:
Appellee :
NO. 42 EDA 2001
Appeal from the Order entered December 1, 2000,
In the Court of Common Pleas of Delaware County
Civil, No. 00-7550
BEFORE: McEWEN, P.J.E., JOHNSON, AND JOYCE, JJ.
OPINION BY McEWEN, P.J.E.:
Filed: October 24, 2002
¶ 1
This appeal from an order dismissing, in response to the preliminary
objections of CitiFinancial Services, Inc., f/k/a Commercial Credit Plan
Consumer Discount Company (hereinafter "CitiFinancial"), the class action
complaint filed by Robert and Judith Lytle, presents substantial questions
concerning, inter alia, the extent to which federal law requires state courts
to allow the use of a pre-dispute arbitration clause in a consumer contract to
circumvent state consumer protection statutes.1 While the contentious

1 The use of pre-dispute arbitration clauses to defeat and eviscerate state
consumer protection statutes has been discussed in a number of law journal
articles: "Pre-Dispute Mandatory Arbitration in Consumer Contracts: A Call
for Reform", 38 Hous.L.Rev. 1237 (2001); "As Mandatory Binding Arbitration
Meets the Class Action, Will the Class Action Survive?" Sternlight, Jean R.,
42 Wm. and Mary L.Rev.1 (2000); "Rethinking the Constitutionality of the
Supreme Court's Preference for Binding Arbitration: A Fresh Assessment of
Jury Trial, Separation of Powers, and Due Process Concerns", Sternlight,
Jean. R., 72 Tul.L.Rev. 1 (1997). See also: "A Shield Against Arbitration:
U.C.C. Section 2-207's Role in the Enforceability of Arbitration Agreements
Included with Delivery of Products", 51 Ala.L.Rev. 821 (2000); "`Unfair'

J. A38007/01
nature of this issue inspired us to review all of the relevant decisions in this
evolving contest in order to resolve the question2 presented, the procedural
posture of this case requires that we vacate the order of dismissal and
remand the record to permit the trial court, in the first instance, to receive
and entertain evidence on certain defenses interposed by the parties.
¶ 2
Appellants, Robert and Judith Lytle, husband and wife who resided in
Delaware County, Pennsylvania, applied to Appellee CitiFinancial for a loan
to be secured by a mortgage on their residence. The record presently before
this Court consists only of the class action complaint filed by the Lytles, the
preliminary objections filed by CitiFinancial, and the Lytle's response to

Arbitration Clauses", Drahozal, Christopher R., 2001 U.Ill.L.Rev. 695 (2001);
"Arbitration of Consumer Claims: The Sad Case of Two-Time Victim Terry
Johnson or Where Have You Gone Learned Hand?", Cappalli, Richard B., 10
B.U.Pub.Int.L.J. 366 (2001); Schwartz, "Enforcing Small Print to Protect Big
Business: Employee and Consumer Rights Claims in an Age of Compelled
Arbitration", 1997 Wisc.L.Rev.33 (1997); Budnitz, "Arbitration of Disputes
between Consumers and Financial Institutions: A Serious Threat to
Consumer Protection", 10 Ohio St.J. on Dispute Resolution 267 (1995);
"Arbitration Clauses in Consumer Contracts: Building Barriers to Consumer
Protection", Frederick L. Miller, 78 MI Bar Jnl., 302 (1999).
2 We summarily dismiss on the basis of the trial court opinion, the claims of
appellants (1) that Act 6 is applicable to a mortgage in excess of $50,000,
see 41 P.S. § 101; Peoples Bank v. Dorsey, 683 A.2d 291, 296 n.6
(Pa.Super. 1996), appeal denied, 548 Pa. 628, 693 A.2d 967 (1997), and
(2) that a court may not dismiss a complaint asserting claims which are
subject to arbitration, but must stay the matter. See, e.g.: Seus v. John
Nuveen & Co., Inc., 146 F.3d 175, 178 (3rd Cir. 1998), cert. denied, 525
U.S. 1139, 119 S.Ct. 1028, 143 L.Ed. 2d 38 (1999); Alford v. Dean Witter
Reynolds, Inc., 975 F.2d 1161, 1164 (5th Cir. 1992). We do not reach, and
express no opinion, on the issue of whether a claim under Sections 502 and
503 of the Act can be brought as a class action.
- 2 -

J. A38007/01
those objections. The record does not provide any information concerning
the process by which appellants applied for and obtained approval of the
loan at issue in this litigation, or any information concerning fees paid or
documents exchanged prior to settlement on the loan, or what information,
if any, concerning the terms of the loan, was provided to the Lytles when
they applied for the loan or at any other time prior to settlement on May 28,
1997. Settlement apparently occurred on May 28, 1997, at which time the
Lytles executed a mortgage, as well as a security agreement and note3
which obligated them to make 180 payments of $1,455.15 each,
commencing July 2, 1997, in return for a loan in the amount of $121,236.53
at the annual percentage rate of 12%.
¶ 3
The esteemed Judge Harry J. Bradley has provided a succinct
recitation of the facts contained in the pleadings:
This is a class action. Plaintiffs' complaint alleges claims
against CitiFinancial for: violation of the federal Truth-in-
Lending Act (Count I); violation of Pennsylvania Act of
January 30, 1974 (hereinafter referred to as "Act 6")
(Count II); violation of the Pennsylvania Unfair Trade
Practices and Consumer Protection Law (Count III);
breach of contract (Count IV); unjust enrichment (Count
V); and fraud (Count VI).

3 The loan documents reflect that appellants at settlement were charged
$2,424.73 as a loan discount fee, $873.75 for the title insurance by a
business affiliated with CitiFinancial, and $9,669.32 for credit life insurance,
and that the total amount of interest to be paid over the life of the loan
appears as $140,690.47. One would not be surprised were the insurer, to
whom the $9,669.32 credit life insurance premium was paid, an affiliate of
appellee CitiFinancial.
- 3 -

J. A38007/01
Plaintiffs' complaint stems from a loan arrangement
plaintiffs entered into with CitiFinancial on May 28, 1997.
Plaintiffs borrowed the principal amount of one hundred
twenty-three thousand six hundred sixty-one dollars and
twenty-six cents ($123,661.26). This loan was secured
by a mortgage on plaintiffs' residence. Plaintiffs made
the installment payments as provided by the loan
agreement. On or about August 18, 1998, plaintiffs
refinanced and made full prepayment to CitiFinancial. In
order to make full payment and to cause the mortgage to
be satisfied, CitiFinancial required plaintiffs pay defendant
the total amount of one hundred twenty-four thousand
five hundred fifty-four dollars ($124,554.00) comprised of
the following charges: principal balance unearned interest
[of $9,575.13]; prepayment penalty [of $7,123.75];
release fee [of $18.00]; and unspecified charges [of
$1,862.19].
The complaint avers that defendant's actions in collecting
a prepayment penalty and unearned finance charges
when a mortgage is satisfied early violate state and
federal laws as well as Pennsylvania common law.
Plaintiffs filed their complaint as a class action alleging
that they represented the class of persons who paid
CitiFinancial a prepayment penalty and unearned finance
charges when a mortgage loan was paid off early.
Defendant filed preliminary objections to plaintiffs'
complaint which were sustained [based on the existence
of an arbitration agreement contained in the loan
documents signed by the plaintiffs].
¶ 4
The preliminary objections which prompted dismissal of the complaint
provided:
1. On or about August 18, 2000, Plaintiffs Robert E. Lytle
and Judith Lytle ("Plaintiffs") filed a Complaint alleging
claims for violations of the Truth in Lending Act,
Pennsylvania Act of January 30, 1974 (P.L. 13, No. 6,
hereinafter "Act 6"), the Pennsylvania Unfair Trade
Practices Act, breach of contract, fraud and unjust
enrichment. A true and correct copy of Plaintiffs'
Complaint is attached hereto as Exhibit "A".
- 4 -

J. A38007/01
2. Plaintiffs' Complaint stems from a loan transaction
entered into between Plaintiffs and CitiFinancial on May
28, 1997. See Complaint ¶ 15, Ex. A.
3. Plaintiffs seek to bring this action on behalf of "the
entire class of persons similarly situated." See Complaint
¶¶ 5-13, Ex. A.
PRELIMINARY OBJECTION TO ALL COUNTS OF THE
COMPLAINT PURSUANT TO PA.R.CIV.P. 1028(6)
4. On May 28, 1997, Plaintiffs executed and delivered to
CitiFinancial a Disclosure Statement, Note and Security
Agreement (the "Agreement"). See Complaint ¶ 15, Ex.
A. A true and correct copy of the Agreement is attached
hereto and incorporated herein as Exhibit "B."
5. Inherent in this Agreement, is an Arbitration Provision
which mandates that all claims, subject to two exceptions
which are inapplicable here, shall be resolved by binding
arbitration. A true and correct copy of the Arbitration
Provision is attached hereto as Exhibit "C."
6. The binding Arbitration Provision precludes Plaintiffs
from litigating this matter in this Court. See Arbitration
Provision, ¶ 3, Ex. C.
DEMURRER TO COMPLAINT: ACT 6 PRECLUDES
CERTIFICATION OF A CLASS
7. Plaintiffs seek to bring this action on behalf of a class
of people. See Complaint, ¶¶ 5-13, Ex.A.
8. Act 6 prohibits class certification of this action. See
41 P.S. § 504 (1999).
DEMURRER TO COUNT II: PLAINTIFFS' MORTGAGE
IS NOT A "RESIDENTIAL MORTGAGE" PURSUANT TO
PENNSYLVANIA ACT OF JANUARY 30, 1974 (ACT 6)
9. Plaintiffs allege that CitiFinancial violated Pennsylvania
Act of January 30, 1974 (hereinafter referred to as "Act
6"). See Complaint, ¶¶ 34-43, Ex.A.
- 5 -

J. A38007/01
10. Plaintiffs aver that the mortgage at issue is a
"residential mortgage" under Act 6. See Complaint, ¶ 37,
Ex. A.
11. Act 6 defines a "residential mortgage" as an
"obligation to pay a sum of money in an original bona fide
principal amount of fifty thousand dollars ($50,000) or
less ..." 41 P.S. § 101 (1999).
12. Plaintiffs assert in their Complaint that the principal
amount of the obligation was One hundred twenty-three
thousand six hundred sixty-one dollars and twenty-six
cents ($123,661.26), which clearly exceeds the statutory
limit. See Complaint, ¶ 15, Ex. A.
13. Because the amount of the loan far exceeds the
statutory limit of Act 6, the Second Count of Plaintiffs'
Complaint is legally insufficient and must be dismissed.
WHEREFORE, Defendant CitiFinancial Services, Inc.,
f/k/a Commercial Credit Plan Consumer Discount
Company respectfully requests that its Preliminary
Objections be sustained and that the Complaint be
dismissed in its entirety. In the alternative, Defendant
requests that Count II of the Complaint be dismissed
because it is legally insufficient.
¶ 5
The trial court, in direct response to the preliminary objections,
dismissed the complaint with prejudice and directed the parties to proceed
to arbitration. Appellants claimed in their response to the preliminary
objections, and now argue on appeal to this Court that this ruling was error
as the arbitration provisions of the loan contract are unenforceable under
Pennsylvania law.
¶ 6
The relevant portions of the Note executed by the Lytles on May 28,
1997, provided, inter alia:
- 6 -

J. A38007/01
DEFAULT: Borrower will be in default if he does not make
any scheduled payment on time or fails to comply with
the provisions of any mortgage or the real property which
secures this loan. If Borrower defaults, Lender may
require Borrower to repay the entire unpaid Principal
balance and any accrued interest at once. Lender's
failure to exercise or delay in exercising any of its rights
when default occurs does not constitute a waiver of those
or any other rights under this agreement. As permitted
by Pennsylvania Law, Borrower agrees to pay
actual and reasonable attorney's fees, court costs
and other actual and reasonable costs incurred in
foreclosing on the real property securing this loan.
Borrower will receive written notice at least 3 days prior
to foreclosure. [emphasis supplied]
LAW THAT APPLIES: Pennsylvania law and federal law,
as applicable govern this Disclosure Statement, Note and
Security Agreement. If any part is unenforceable, this
will not make any other part unenforceable. In no event
will Borrower be required to pay interest or charges in
excess of those permitted by law.
* * * *
ARBITRATION PROVISION:
READ THE FOLLOWING ARBITRATION PROVISION
CAREFULLY. IT LIMITS CERTAIN OF YOUR RIGHTS,
INCLUDING YOUR RIGHT TO OBTAIN REDRESS
THROUGH COURT ACTION.
In consideration of Lender making the extension of credit
described above and other good and valuable
considerations, the receipt and sufficiency which is
acknowledged by both parties, it is further agreed as
follows:
Definitions for Arbitration Provision. As used in this
Arbitration Provision ("Provision"), the following
definitions will apply:
"You" or "Your" means any or all of Borrower(s) who
execute this Provision, and their heirs, survivors, assigns,
and representatives.
- 7 -

J. A38007/01
"We" or "Us" means Lender, any assignee, together with
their respective corporate parents, subsidiaries, affiliates,
predecessors, assignees, successors, employees, agents,
directors, and officers (whether acting in their corporate
or individual capacity).
"Credit Transaction" means any one or more past,
present, or future extension, application, or inquiry of
credit or forbearance of payment such as loan, retail
credit agreement, or otherwise from any of Us to You.
"Claim" means any case, controversy, dispute, tort,
disagreement, lawsuit, or claim now or hereafter existing
between You and Us. A Claim includes without limitation,
anything that concerns:
· This Provision;
· Any past, present, or future Credit Transaction;
· Any past, present, or future insurance, service, or
product that is offered in connection with a Credit
Transaction;
· Any documents or instruments that contain
information about any Credit Transaction, insurance,
service, or product; or
· Any act or omission by any of Us regarding any Claim.
Agreement to Arbitrate Claims. Upon written request
by either party that is submitted according to the
applicable rules for arbitration, any Claims except
those specified below in this Provision, shall be
resolved by binding arbitration in accordance with (i) the
Federal Arbitration Act; (ii) the Expedited Procedures of
the Commercial Arbitration Rules of the American
Arbitration Association[4] ("Administrator"); and (iii) this
Provision, unless both agree in writing to forgo
arbitration. The terms of this Provision shall control any
inconsistency between the rules of the Administrator and
the Provision. You may obtain a copy of the arbitration
rules by calling (800) 778-7879. Any party to this
Provision may bring an action, including summary or

4 The arbitration clause initially provides for common law arbitration
pursuant to the Rules of the American Arbitration Association ("AAA").
Midomo Co., Inc. v. Presbyterian Housing Development Co., 739 A.2d
180, 183 (Pa.Super. 1999); Popskyj v. Keystone Insurance Co., 565
A.2d 1184, 1189 (Pa.Super. 1989), appeal denied, 525 Pa. 602, 575 A.2d
567 (1990).
- 8 -

J. A38007/01
expedited proceeding, to compel arbitration of any Claim,
and/or to stay the litigation of any Claims pending
arbitration, in any court having jurisdiction. Such motion
may be brought at any time, even if a Claim is part of a
lawsuit, up until the entry of a final judgment. [emphasis
supplied]
Examples of Claims that are governed by this Agreement
including those involving:
· The Truth in Lending Act and Regulation Z;
· The Equal Credit Opportunity Act and Regulation B;
· State insurance, usury, and lending laws; fraud or
misrepresentation, including claims for failing to
disclose material facts;
· Any other federal or state consumer protection statute
or regulation;
· Any party's execution of this Provision and/or
willingness to be bound by its terms and provisions; or
· Any dispute about closing, servicing, collecting, or
enforcing a Credit Transaction.
Judgment. Judgment upon any arbitration award may
be entered in any court having jurisdiction.
Claims Excluded from Arbitration. The following
types of matters will not be arbitrated. This means
that neither one of us can require the other to
arbitrate:
· Any action to effect a foreclosure to transfer title
to the property being foreclosed; or
· Any matter where all parties seek monetary
damages in the aggregate of $15,000.00 or less
in total damages (compensatory and punitive),
costs and fees. [emphasis supplied]
However, should either party initiate arbitration, the other
party, at its option, may seek injunctive and monetary
relief in arbitration. Participating in lawsuit or seeking
enforcement of this section by a court shall not waive the
right to arbitrate any other Claim.
Additional Terms.
Administration of Arbitration. Arbitration shall be
administered by the Administrator, but if it is unable
or unwilling to administer the arbitration, then
J·A·M·S/Endispute, Inc. will administer any
- 9 -

J. A38007/01
arbitration required under this Provision pursuant to
its Streamlined Arbitration Rules and Procedures
except for any appeal, which will be governed by
Rule 23 of the Comprehensive Arbitration Rules and
Procedures of J·A·M·S/Endispute, Inc.
Place of Arbitration. The arbitration shall be
conducted in the county of Your residence, unless all
parties agree to another location.
Timing of Hearing. The arbitration hearing shall
commence within ninety (90) days of the demand for
arbitration made to the Administrator in accordance
with its rules.
Appeal. Either You or We may appeal the
arbitrator's award to a three-arbitrator panel
selected through the Administrator, which shall
reconsider de novo any aspect of the initial
award requested by the appealing party. The
expedited procedures of the Administrator shall not
govern any appeal.
An appeal will be governed by Rule 23[5] of the
Comprehensive Arbitration Rules and Procedures of
J·A·M·S /Endispute, Inc.
No Class Actions/No Joinder of Parties. You
agree that any arbitration proceeding will only
consider Your Claims. Claims by or on behalf of
other borrowers will not be arbitrated in any
proceeding that is considering Your Claims.
Similarly, You may not join with other

5 Rule 23 of the Comprehensive Rules and Procedures of J·A·M·S/Endispute,
Inc. provides: "Waiver of Hearing. The parties may agree to waive the oral
hearing and submit the dispute to the Arbitrator for an Award based on
written submissions and other evidence as the parties may agree." It merits
mention that J·A·M·S/Endispute, Inc., is an entity owned by the very
arbitrators who adjudicate disputes between the borrower and the very
lender who assigns the disputes to J·A·M·S. Thus the arbitrators, in their
role as owners, must seek to promote the goodwill of the lenders so as to
develop and maintain a volume of business, namely, cases for adjudication.
CitiFinancial is a supplier of cases, even, perhaps, a major source of business
for J·A·M·S. It matters little whether it was Aesop or Confucius who
counseled that one should not bite the hand that feeds, since the message is
an apt reminder of the quite valid perception of a conflict of interest in the
arbitration process.
- 10 -

J. A38007/01
borrowers to bring Claims in the same
arbitration proceeding, unless all of the
borrowers are parties to the same Credit
Transaction. [emphasis supplied]
Limitation on Punitive Damages. If applicable law
permits the award of punitive damages and the
arbitrator authorizes such an award, any punitive
damages awarded to You or Us may not exceed
the greater of $250,000.00 or three times the
amount of actual compensatory damages
awarded by the arbitrator. [emphasis supplied]
Depositions . After a demand for arbitration is made,
You and We may conduct a limited number of
depositions by mutual agreement. Any
disagreements over depositions will be resolved by
the arbitrator.
Costs. The cost of any arbitration proceeding shall
be divided as follows:
· The party making demand upon the Administrator
for arbitration shall pay $125.00 to the
Administrator when the demand is made.
· We will pay to the Administrator all other costs for
the arbitration proceeding up to a maximum of
one day (eight hours) of hearings.
· All costs of the arbitration proceeding that exceed
one day of hearings will be paid by the non-
prevailing party.
· In the case of an appeal, the appealing party
will pay any costs of initiating an appeal.
The non-prevailing party shall pay all costs,
fees, and expenses of the appeal proceeding
and, if applicable, shall reimburse the
prevailing party for the cost of filing an
appeal. [emphasis supplied]
· Each party shall pay his/her own attorney, expert,
and witness fees and expenses, unless otherwise
required by law.
Right of Rescission. You may rescind any Credit
Transaction within three business days after closing by
returning all proceeds (if any) to Us with a written
notification of Your rescission. If You rescind a Credit
Transaction within three business days after closing, You
may also rescind this Provision as it applies to the Credit
- 11 -

J. A38007/01
Transaction that You rescinded. This right to cancel the
Credit Transaction is in addition to any other right to
cancel a Credit Transaction You may have under Federal
or State law, or as may have been communicated to You
in writing by Us in any loan solicitation, advertisement or
other marketing related document.
Governing Law. This Provision is governed by Federal
law and by the laws of the state where the closing of the
Credit Transaction took place, but only to the extent that
such state laws are consistent or compatible with federal
law.
Severability. If the arbitrator or any court determines
that one or more terms of this Provision or the arbitration
rules are unenforceable, such determination shall not
impair or affect the enforceability of the other provisions
of this Agreement or the arbitration rules.
Special Acknowledgments.
You understand and acknowledge by signing Your name
to this Provision that (i) a court and/or jury will not hear
or decide any Claim governed by this Provision, (ii) the
funding for Your Credit Transaction will come in whole or
in part from sources outside this state, which will
constitute interstate commerce within the meaning of the
United States Arbitration Act, 9 U.S.C. §§ 1-9, (iii)
discovery in any arbitration proceeding can be much
more limited than in a court proceeding, (iv) the
arbitrator may not give written reasons for his/her award,
(v) rights to appeal an arbitration award are very
limited, and (vi) the rights of the parties hereunder may
not be exactly mutual in all respects. [emphasis supplied]
READ THE ABOVE ARBITRATION PROVISION
CAREFULLY. IT LIMITS CERTAIN OF YOUR RIGHTS,
INCLUDING YOUR RIGHT TO OBTAIN REDRESS
THROUGH COURT ACTION.
___________/S/___________(Seal)
ROBERT E LYTLE
Borrower
_________/S/_____________(Seal)
JUDITH LYTLE
Borrower
- 12 -

J. A38007/01
¶ 7
The Mortgage which was also executed by the Lytles at the May 28
settlement provided, inter alia:
* * *
13. Governing Law; Severability. The state and local
laws applicable to this Mortgage shall be the laws of the
jurisdiction in which the Property is located. The
foregoing sentence shall not limit the applicability of
Federal law to this Mortgage. In the event that any
provision or clause of this Mortgage or the Note conflicts
with applicable law, such conflict shall not affect other
provisions of this Mortgage or the Note which can be
given effect without the conflicting provision, and to this
end the provisions of this Mortgage and the Note are
declared to be severable. As used herein, "costs",
"expenses" and "attorneys' fees" include all sums to the
extent not prohibited by applicable law or limited therein.
* * *
NON-UNIFORM COVENANTS. Borrower and Lender
further covenant and agree as follows:
17. Acceleration; Remedies. Upon Borrower's breach
of any covenant or agreement of Borrower in this
Mortgage, including the covenants to pay when due any
sums secured by this Mortgage, Lender prior to
acceleration shall give notice to Borrower as provided by
applicable law specifying, among other things: (1) the
breach; (2) the action required to cure such breach; (3) a
date, not less than 30 days from the date the notice is
mailed to Borrower, by which such breach must be cured;
and (4) that failure to cure such breach on or before
the date specified in the notice may result in
acceleration of the sums secured by this Mortgage,
foreclosure by judicial proceedings, and sale of the
Property. The notice shall further inform Borrower of
the right to reinstate after acceleration and the right to
assert in the foreclosure proceeding the nonexistence of a
default or any other defense of Borrower to acceleration
- 13 -

J. A38007/01
and foreclosure. If the breach is not cured on or before
the date specified in the notice, Lender, at Lender's
option, may declare all of the sums secured by this
Mortgage to be immediately due and payable without
further demand and may foreclose this Mortgage by
judicial proceeding. Lender shall be entitled to collect
in such proceeding all expenses of foreclosure, including,
but not limited to, reasonable attorneys' fees, and costs
of documentary evidence, abstracts and title reports.
[emphasis supplied]
¶ 8
The trial court judge concluded, based solely on the foregoing loan
documents, that the arbitration provisions of the contract were not
unconscionable and that the controversy between the parties was subject to
arbitration pursuant to the Federal Arbitration Act, and thus dismissed the
complaint.
¶ 9
The Federal Arbitration Act, 9 U.S.C. §§1-14 (hereinafter "FAA"), was
enacted in 1925 in response to the common law doctrine which provided
that arbitration clauses were revocable at will by either party to the contract.
The Act has been more recently interpreted by the U.S. Supreme Court to
preempt any state statutes which are specifically designed to limit or restrict
arbitration clauses, preclude their use in certain types of contracts, or
prohibit their enforcement. Perry v. Thomas, 482 U.S. 483, 107 S.Ct.
2520, 96 L.Ed.2d 426 (1987); Southland v. Keating, 465 U.S. 1, 12, 104
S.Ct. 852, 858, 59, 79 L.Ed.2d 1 (1984).
The FAA directs courts to place arbitration agreements on
equal footing with other contracts, but it "does not
require parties to arbitrate when they have not agreed to
do so." Volt Information Sciences, Inc. v. Board of
Trustees of Leland Standford Junior Univ., 489 U.S.
- 14 -

J. A38007/01
468, 478, 103 L.Ed.2d 488, 109 S.Ct. 1248 (1989). See
also Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
388 U.S. 395, 404 n.12, 18 L.Ed.2d 1270, 87 S.Ct. 1801
(1967) ("The purpose of Congress in 1925 was to make
arbitration agreements as enforceable as other
contracts, but not more so"). Because the FAA is "at
bottom a policy guaranteeing the enforcement of private
contractual arrangements," Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625
(1985), 87 L.Ed.2d 444, 105 S.Ct. 3346 (1985), we look
first to whether the parties agreed to arbitrate a dispute,
not to general policy goals, to determine the scope of the
agreement. Id. at 626. While ambiguities in the
language of the agreement should be resolved in favor of
arbitration, Volt, 489 U.S., at 476, we do not override
the clear intent of the parties, or reach a result
inconsistent with the plain text of the contract, simply
because the policy favoring arbitration is implicated.
"Arbitration under the [FAA] is a matter of consent,
not coercion." Id. at 479.
EEOC v. Waffle House, Inc., 534 U.S. 279, ___, 122 S.Ct. 754, 764, 151
L.Ed.2d 755, 769 (2002) (January 15, 2002) (emphasis supplied
throughout)(footnote omitted).
¶ 10 Our learned colleague, Judge John T.J. Kelly, astutely examined on
behalf of this Court the federal policy espoused by a majority6 of the U.S.
Supreme Court requiring the enforcement of arbitration agreements, even
those contained in consumer contracts:
The Federal Arbitration Act (FAA) has been interpreted by
the Supreme Court as mandating the enforcement of all

6 The modern expansive interpretation of the FAA, which raises complex
issues of federalism, has not been embraced by Justices O'Connor, Scalia, or
Thomas. See: Allied Bruce Terminix v. Dobson, 513 U.S. 265, 282-286,
115 S.Ct. 834, 844-846, 130 L.Ed.2d 753, 769-772 (1994) (Concurring
Opinion of O'Connor, J., Dissenting Opinions of Thomas, Scalia, JJ.).
- 15 -

J. A38007/01
arbitration agreements which "evidence a transaction
involving commerce, unless they are revocable on
contractual grounds." Southland Corp. v. Keating, 465
U.S. 1, 11-12, 104 S.Ct. 852, 858, 59, 79 L.Ed.2d 1, 12
(1984) [footnote omitted]. The Court extended this
principle of enforceability to the states, noting that if
Congress did not intend states to be bound, the limiting
language "evidenc[ing] a transaction involving
commerce" would have been entirely superfluous. Id.
* * * *
In Southland Corp. v. Keating, supra, which extended
federal enforceability standards to state courts, the Court
noted that the Federal Arbitration Act was motivated by a
congressional purpose to overcome the rule that courts of
equity will not enforce arbitration agreements. [footnote
omitted] The Court noted that the resistance of many
state courts was grounded solely in the tradition of
English courts jealously maintaining their own
jurisdiction. See Southland Corp. v. Keating, supra,
465 U.S. at 13, 104 S.Ct. 859, 79 L.Ed.2d at 13-14.
The Southland Corp. v. Keating, supra, established a
general rule of broad enforceability for arbitration
agreements, including a strong suggestion that
arbitrators be allowed to dispense equitable relief. While
this decision will force many states to reevaluate and
reverse their historical disdain for arbitration,
Pennsylvania's policy towards arbitration is entirely
consistent with the United States Supreme Court's
holding. In Pennsylvania, our courts' decisions have been
governed by two basic, but hard to reconcile propositions:
(1) arbitration agreements are to be strictly construed
and ... such agreements should not be extended by
implication and (2) when the parties agree to arbitration
in a clear and unmistakable manner, then every
reasonable effort will be made to favor such agreements.
See Emmaus Municipal Auth. V. Eltz, 416 Pa. 123,
125, 204 A.2d 926, 927 (1964); Hassler v. Columbia
Gas Transmission Corp., 318 Pa.Super. 302, 307, 464
A.3d 1354, 1356 (1983).
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Dickler v. Shearson Lehman Hutton, Inc., 596 A.2d 860, 862-863
(Pa.Super. 1991), appeal denied, 532 Pa. 633, 616 A.2d 984 (1992).
"When one party to an agreement seeks to prevent
another from proceeding to arbitration, judicial inquiry is
limited to determining (1) whether a valid agreement to
arbitrate exists between the parties and, if so, (2)
whether the dispute involved is within the scope of the
arbitration provision." Midomo, 739 A.2d at 186
(quoting Smith, 687 A.2d at 1171). "If a valid arbitration
agreement exists between the parties and appellant['s]
claim is within the scope of the agreement, the
controversy must be submitted to arbitration."
Goldstein v. Depository Trust, 717 A.2d 1063, 1066
(Pa.Super. 1998) (quoting Messa v. State Farm Ins.
Co., 433 Pa.Super. 594, 641 A.2d 1167, 1170 (1994)).
Highmark, Inc. v. Hospital Service Associates of Northeastern
Pennsylvania, 785 A.2d 93, 98 (Pa.Super. 2001), appeal denied, ___ Pa.
___, 797 A.2d 914 (2002). Accord: Smith v. Cumberland Group, 687
A.2d 1167, 1171 (Pa.Super. 1997).
¶ 11 The broad provisions of the arbitration agreement contained in the
documents drafted by CitiFinancial and signed by appellants clearly provide
for arbitration of all controversies (involving more than $15,000) which could
arise between the parties except for a default by the appellants, in which
case appellee has specifically retained for itself the one-sided right to
proceed against appellants in the Court of Common Pleas. Thus, the present
dispute, which is within the scope of the arbitration provision, must be
submitted to arbitration if the agreement to arbitrate is valid and
enforceable.
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¶ 12 The reply of appellants to the preliminary objections of appellee raised
the issue of the enforceability of the arbitration agreement based on
claims that the contract was (1) unconscionable, (2) against public policy,
and (3) inapplicable to the instant dispute, since the instant controversy was
initiated as a class action, and the contract expressly precluded arbitration of
class actions. The trial court did not conduct an evidentiary hearing on the
issues raised by the pleadings by reason of its determination that, as a
matter of law, the arbitration agreement was enforceable and that the
complaint must, as a result, be dismissed.
I.
Applicability of the Federal Arbitration Act
¶ 13 The issue of whether the FAA controls the instant case to the exclusion
of state law is dependent upon whether the parties' contract is one
"evidencing a transaction involving commerce." 9 USC § 2. Appellants have
alleged in their complaint that they are residents of the Commonwealth and
that appellee CitiFinancial is a Pennsylvania corporation. Appellee alleged in
its preliminary objections that the contract under scrutiny involves interstate
commerce, and thus was subject to the FAA. The complaint was dismissed
upon those preliminary objections without receipt of any evidence upon this
issue. Our standard of review of a ruling on preliminary objections requires
that we accept as true all of the factual averments of the complaint.
Sunbeam Corp. v. Liberty Mutual Insurance Co., 566 Pa. 494, 499, 781
A.2d 1189, 1192 (2001); Sclabassi v. Nationwide Mutual Fire
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J. A38007/01
Insurance Co., 789 A.2d 699, 701 (Pa.Super. 2001), appeal denied, ___
Pa. ___, 797 A.2d 915 (2002). The claim of appellee that the contract is
one affecting interstate commerce raises a factual issue. See: Allied-Bruce
Terminix Companies, Inc. and Terminix International Company v.
Dobson, 513 U.S. 265, 115 S.Ct. 834, 130 L.Ed.2d 753 (1995).
[M]ost courts today determine that the existence of
interstate commerce is an evidentiary matter. See, e.g.
KKW Enteprises, Inc. v. Gloria Jean's Gourmet
Coffees Franchising Corp., 184 F.3d 42 (1st Cir. 1999)
("the contracts to which the statute applies implicate
interstate commerce, thus subjecting them to the reach
of the FAA."); Ruby-Collins, Inc. v. City of Huntsville,
Alabama, 748 F.2d 573 (11th Cir. 1984) (allowing
evidentiary hearing to establish the existence of the
"interstate nexus" required by the FAA); C.P. Robinson
Construction Company v. National Corp. for Housing
Partnerships, 375 F. Supp. 446, 451 (M.D.N.C. 1974)
(Setting forth the criteria for a transaction in commerce,
including, in general, trade between citizens of the
several states and in particular, "purchases of large
quantities of building materials and fixtures from out-of-
state suppliers.") See also Starr Elec. Co. v. Basic
Constr. Co., 586 F. Supp. 964, 965-66 (M.D.N.C. 1982)
("The Court must decide first whether the subcontract
between Starr and Basic evidences a transaction in
"commerce," within the meaning of 9 U.S.C. § 1);
Pennsylvania Eng'g Corp. v. Islip Resource
Recovery Agency, 710 Supp. 456, 460 (E.D.N.Y. 1989)
("A contractual arbitration agreement is subject to the
Federal Arbitration Act if the contract `evidences a
transaction involving' interstate or maritime commerce.
9 U.S.C. § 2. ...)
United House of Prayer for All People of the Church on the Rock of
the Apostolic Faith v. LMA International, Ltd., 107 F.Supp. 2nd 227, 231
(S.D.N.Y. 2000). As the only evidence presently in the record is the
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complaint and the preliminary objections filed by appellee, we are unable to
resolve the factual issue of whether the contract involves interstate
commerce and is thus controlled by the FAA.
¶ 14 However, Pennsylvania law on the enforceability of agreements to
arbitrate is in accord with federal law and requires enforcement of arbitration
provisions as written, permitting such provisions to be set aside only for
generally recognized contract defenses such as duress, illegality, fraud,
unconscionability. See: Carll v. The Terminix International Company,
L.P., 793 A.2d 921 (Pa.Super. 2002). Since there is no appreciable
difference between Pennsylvania law and the provisions of the FAA on the
enforceability of agreements to arbitrate, we will presume, solely for
purposes of this appeal, that the contract between the parties is one
involving interstate commerce,7 thus rendering the FAA controlling upon the
issue of the enforceability of the arbitration agreement.
¶ 15 The standard of review which the United States Supreme Court has
prescribed for a state court determination of whether there is a valid
agreement to arbitrate has been keenly described as directing that a state
court
"must look to the body of federal arbitration law,"
Bhatia, 818 F.2d at 421, which recognizes that "the
question of arbitrability [is to] be addressed with a
`healthy regard for the federal policy favoring arbitration,'

7 While the loan documents contain a statement to the effect that the
transaction is one involving interstate commerce, this self-serving
declaration is not dispositive of the issue.
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with doubts regarding the scope of the agreement
resolved in favor of arbitration. id. (quoting Moses H.
Cone, 460 U.S. at 24-25, 103 S.Ct. at 941). As to the
more specific issue of whether there is a valid agreement
to arbitrate, "`courts generally ... should apply ordinary
state-law principles that govern the formation of
contracts'," Webb, 89 F.3d at 257 (quoting First
Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 115
S.Ct. 1920, 1924, 131 L.Ed.2d 985 (1995)), but in doing
so, must give "due regard ... to the federal policy favoring
arbitration," id. (quoting Volt Info. Sciences, Inc. v.
Board of Trustees of Leland Stanford Jr. Univ., 489
U.S. 468 , 475-76, 109 S. Ct. 1248, 1253-54, 103
L.Ed.2d 488 (1989)); McKee v. Home Buyers
Warranty Corp. II, 45 F.3d 981, 984 (5th Cir. 1995) ("In
construing an arbitration agreement within the scope of
the FAA, `as with any other contract, the parties'
intentions control, but those intentions are generously
construed as to issues of arbitrability'.") (quoting
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 627, 105 S.Ct. 3346, 87 L.Ed.2d 444
(1985))). At the same time, however, the court may
grant relief to a party opposing arbitration where he
presents "well supported claims that the agreement to
arbitrate resulted from the sort of fraud or overwhelming
economic power that would provide grounds `for the
revocation of any contract'," Mitsubishi Motors, 473
U.S. at 627, 105 S.Ct. 3346 (quoting 9 U.S.C. § 2); see
also Bhatia, 818 F.2d at 421 (court should at all times
"remain keenly attuned to well-grounded claims that `the
agreement to arbitrate resulted from the sort of fraud or
overwhelming economic power that would provide
grounds "for the revocation of any contract."'" (quoting 9
U.S.C. § 2)); Rhode v. E&T Investments, Inc., 6
F.Supp. 2d 1322, 1326 (M.D. Ala. 1998) ("[Section] 2
`gives States ... methods for protecting consumers against
unfair pressure to agree to a contract with an
unwarranted arbitration provision' both in equity and
under principles of contract law." (quoting Allied-Bruce
Terminix v. Dobson, 513 U.S. 265, 281, 115 S.Ct. 834,
130 L.Ed.2d 753 (1995))).
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Bank One, N.A. v. Coates, 125 F.Supp.2d 819, 828-829 (S.D.Miss. 2001),
aff'd., 34 Fed. App. 964, 2002 U.S. App.LEXIS 7759 (2002).
¶ 16 As Justice Stephen G. Breyer noted, writing for a majority of the U.S.
Supreme Court in Allied-Bruce Terminix Companies, Inc. v. Dobson,
supra:
Section 2 [of the FAA] gives States a method for
protecting consumers against unfair pressure to agree to
a contract with an unwanted arbitration provision. States
may regulate contracts, including arbitration clauses,
under general contract law principles and they may
invalidate an arbitration clause `upon such grounds as
exist at law or in equity for the revocation of any contract
9 U.S.C. § 2 (emphasis added). What States may not do
is decide that a contract is fair enough to enforce all its
basic terms (price, service, credit) but not fair enough to
enforce its arbitration clause. The Act makes any such
state policy unlawful, for that kind of policy would place
arbitration clauses on an unequal "footing", directly
contrary to the Act's language and Congress' intent.
Id. at 513 U.S. at 281, 115 S.Ct. at 843, 130 L.Ed.2d at 769.
¶ 17 Thus, appellants may avoid being compelled to arbitrate their claims if
they produce evidence of such "grounds as exist at law or in equity for the
revocation of any contract." 9 U.S.C § 2. "Generally applicable contract
defenses, such as fraud, duress or unconscionability, may be applied to
invalidate arbitration agreements without contravening" the enforcement
provisions of the Federal Arbitration Act. Doctor's Associates, Inc. v.
Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652, 1656, 134 L.Ed.2d 902, 909
(1996).
II.
Unconscionability
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¶ 18 Appellants argue that the loan documents which they signed are
unconscionable contracts of adhesion.8

8
This litigation reveals yet another vignette in the timeless and constant
effort by the haves to squeeze from the have nots even the last drop. It
merits emphasis that the term haves goes beyond actual possession of
wealth, to include as well power, resources, and position and even more,
for the haves own the access to even more power and resources and
advantage.
The idealists will blithely observe that the have nots possess one
advantage, the right to vote, a rather enhanced advantage, says the idealist,
since the have nots so vastly outnumber the haves. Such naivete is more
obtuse than blissful, since it ignores the influence, if not the domination of
the haves upon the election process by reason of the haves profligate, even
unwholesome, financing of both the selection and the election of candidates.
The legislative and executive branches have in a fashion more
occasional than regular risen to serve the interests of the have nots
(borrowers), but the haves (lenders) consistently design new devices and
definitions to preserve the unjust imbalance, since our history demonstrates
that their unquenchable thirst for profits is not to be sated. Nor is the
beneficiary of such efforts ever in doubt since if it's good for the powerful,
it's bad for the people.
A song to which the have nots marched a century ago expressed the
hope that the awesome advantage of the powerful would someday be
adjusted and a semblance of equality would prevail:
I've traveled round this country
From shore to shining shore
It really makes me wonder
The things I heard and saw.
I saw the weary farmer
Plowing sod and loam
I heard the auction hammer
Just a-knocking down their home.
But the banks are made of marble
With a guard at every door
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¶ 19 "An adhesion contract is defined as a `standard form contract prepared
by one party, to be signed by the party in a weaker position, [usually] a
consumer, who has little choice about the terms.'" Huegel v. Mifflin
Construction Co., 796 A.2d 350, ___ (Pa.Super. 2002), quoting Black's
Law Dictionary (7th ed. 1999)). Accord: Robson v. EMC Insurance
Companies, 785 A.2d 507, 510 (Pa.Super. 2001), appeal denied, ___ Pa.
___, 796 A.2d 984 (2002); Armendariz v. Foundation Health Psychcare
Services, Inc., 24 Cal. 4th 83, 6 P.3d 669 (Cal. 2000); Cooper v. MRM
Investment Co., 199 F.Supp. 2d 771, 776 (M.D. Tenn. 2002).
¶ 20 A finding that a contract is one of adhesion does not require that the
court find the contract unconscionable. Even where a contract is found to be
a contract of adhesion, the terms of the contract must be analyzed to
determine whether the contract as a whole, or specific provisions of it, are

And the vaults are stuffed with silver
That the farmer sweated for.
I've seen the weary miners
Scrubbing coal dust from their backs
And I heard their children crying
"Got no coal to heat the shack."
But the banks are made of marble
With a guard at every door
And the vaults are stuffed with silver
That the miner sweated for.
Alas, however, the bankers are still stuffing ever larger vaults.
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unconscionable. Rudolph v. Pennsylvania Blue Shield, 553 Pa. 9, 17,
717 A.2d 508, 512 (1998) (Concurring Opinion, Nigro, J.).
Unconscionability requires a two-fold determination: that
the contractual terms are unreasonably favorable to the
drafter and that there is no meaningful choice on the part
of the other party regarding acceptance of the provisions.
Worldwide Underwriters Ins. Co. v. Brady, 973 F.2d 192, 196 (3rd Cir.
1992) (citations omitted). See: Todd Heller, Inc. v. United Parcel
Service, Inc., 754 A.2d 689, 700 (Pa.Super. 2000). The issue of whether a
contract is unconscionable is a question of law, as to which our scope of
review is plenary. See: Ferguson v. Lakeland Mutual Insurance Co.,
596 A.2d 883, 885 (Pa.Super. 1991), appeal denied, 531 Pa. 639, 611
A.2d 712 (1992); Metalized Ceramics for Electronics Inc. v. National
Ammonia Co., 663 A.2d 762, 764 (Pa.Super. 1995). "In order for a court
to deem a contractual provision unconscionable, it must determine both that
the contractual terms are unreasonably favorable to the drafter and that
there is no meaningful choice on the part of the other party regarding
acceptance of the provisions". Huegel v. Mifflin Construction Co., supra,
796 A.2d at ___ quoting Todd Heller, Inc. v. United Parcel Service, Inc.,
supra, 754 A.2d at 701. Accord: Cooper v. MRM Investment Co.,
supra, 199 F. Supp. 2d at 776; Haun v. King, 690 S.W. 2d 869, 872 (Tenn
Ct. App. 1984).
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¶ 21 Our deeply admired former colleague, now Pennsylvania Supreme
Court Justice Thomas G. Saylor aptly summarized the law of Pennsylvania on
unconscionability:
A contractual provision is unconscionable if: 1) one of the
parties had no meaningful choice with respect to the
provision, and 2) the provision unreasonably favors the
other party. Witmer v. Exxon Corporation, 495 Pa.
540, 434 A.2d 1222 (1981); Metalized Cermaics for
Electronics, Inc. v. National Ammonia Company, 444
Pa.Super. 238, 663 A.2d 762 (1995); Denlinger, Inc. v.
Dendler, 415 Pa.Super. 164, 608 A.2d 1061 (1992);
Moscatiello, supra; Germantown Manufacturing Co.
v. Rawlinson, 341 Pa.Super. 42, 491 A.2d 138 (1985);
Hornberger, supra. Whether a contractual provision is
unconscionable is a question of law for the court.
Denlinger, supra; Hornberger, supra; Jim Dan,
supra. "In determining whether a clause is
unconscionable, the court should consider whether, in
light of the general commercial background and the
commercial needs of a particular trade, the clause is so
one-sided that it is unconscionable under the
circumstances." Jim Dan, 785 F.Supp. at 1200, citing 13
Pa.C.S. § 2302 Comment 1.
Borden, Inc. v. Advent Ink Co., 701 A.2d 252, 265 (Pa.Super. 1997).
Accord: Witmer v. Exxon Corp., 495 Pa. 540, 551, 434 A.2d 1222, 1228
(1981); Antz v. GAF Materials Corp., 719 A.3d 758, 761 (Pa.Super.
1998), appeal denied, 559 Pa. 686, 739 A.2d 1054 (1999); Denlinger,
Inc. v. Dendler, 608 A.2d 1061, 1067 (Pa.Super. 1992); Wagner v.
Estate of Rummel, 571 A.2d 1055, 1058-1059 (Pa.Super. 1990);
Germantown Mfg. Co. v. Rawlinson, 491 A.2d 138, 145 (Pa.Super. 1985)
quoting Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449
C.D. (Cir. 1965); Restatement (Second) of Contracts § 208.
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¶ 22 Our venerable partner Judge John P. Hester in Zak v. Prudential
Property and Casualty Insurance Co., 713 A.2d 681 (Pa.Super. 1998),
did not hesitate to void, as "completely unconscionable", a clause in an
insurance policy which provided that any UIM or UM arbitration award less
than $15,000 would be binding on the parties while either party could obtain
a trial de novo if the award was greater than $15,000, holding that the
clause:
allows the insurer to obtain a trial when the claimant or
insured obtains an arbitration award of any significant
amount but binds the claimant or insured to the amount
of the arbitration award when the claimant or insured is
awarded nothing or a miniscule amount. Appellee
suggests that the clause if fair because "either party" can
appeal if the award is over $15,000. This suggestion
ignores the reality of the effect of the clause. It allows
the insurance company the unfettered right to a trial
whenever an award is made in favor of a claimant or
insured while a losing claimant or insured is bound by his
award. The clause so clearly favors the insurer over the
claimant or insured that it is repugnant to notions of due
process, equal protection, justice, and fair play.
The test of whether a clause in an insurance contract is
unconscionable is two-fold: "First, one of the parties to
the contract must have lacked a `meaningful choice'
about whether to accept the provision in question.
Second, the challenged provision must `unreasonably
favor' the other party to the contract." Koval v. Liberty
Mutual Insurance Co., 366 Pa.Super. 415, 531 A.3d
487, 491 (1987). Both conditions are met in this case.
Zak v. Prudential Property and Casualty Insurance Co., supra, 713
A.2d at 684.
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¶ 23 The arbitration provision at issue in the instant case provides that the
Lytles are required to arbitrate all issues involving more than $15,000, while
CitiFinancial remains free to enforce its rights to repayment of the debt or to
commence foreclosure against the Lytles' home in the Court of Common
Pleas. The arbitration provision also provides a right to a de novo appeal on
any issue, while requiring the payment of substantial costs by the
unsuccessful party in connection with such an appeal.9 The arbitration
provision also prohibits the Lytles from arbitrating their claim as a class
action and precludes them from class action participation as even a member
of a class.
¶ 24 Members of both the United States Senate and the House of
Representatives have recently recognized the relentless attempts by
corporate entities to thwart, through the use of such provisions, every state
consumer statute enacted to balance the economic disparity of the parties,
and have introduced legislation in the Senate10 and the House11 to confront
the pinstriped exploiters.12

9 Even the United States Supreme Court has conceded that "the existence of
large arbitration costs could preclude a litigant ... from effectively vindicating
his federal statutory rights in the arbitrable forum," but held that where "a
party seeks to invalidate an arbitration agreement on the ground that
arbitration would be prohibitively expensive, that party bears the burden of
showing the likelihood of incurring such costs." Green Tree Financial
Corp.-Alabama v. Randolf, 531 U.S. 79, 90-91, 121 S.Ct. 513, 522, 148
L.Ed.2d 373, 383 (2000).
10 The Senate bill provides:
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SECTION 1. SHORT TITLE.
This Act may be cited as the `Consumer Credit Fa ir
Dispute Resolution Act of 2001'.
SEC. 2. CONSUMER CREDIT TRANSACTIONS
(a) DEFINITIONS Section 1 of title 9, United States
Code, is amended
(1) in the section heading, by striking `and
`commerce' defined'
and inserting,
`commerce', `consumer credit transaction',
and `consumer credit contract' defined'; and
(2) by inserting before the period at the end the
following: `; `consumer credit transaction', as
herein defined, means the right granted to a
natural person to incur debt and defer its
payment, where the credit is intended primarily
for personal, family, or household purposes; and
`consumer credit contract', as herein defined,
means any contract between the parties to a
consumer credit transaction.'.
(b) AGREEMENTS TO ARBITRATE Section 2 of title 9,
United States Code, is amended--
(1) by striking `A written' and inserting `(a) IN
GENERAL a written'; and
(2) by adding at the end the following:
`(b) [sic] CONSUMER CREDIT CONTRACTS
`(1) IN GENERAL Notwithstanding the preceding
sentence, a written provision in any consumer
credit contract evidencing a transaction involving
commerce to settle by arbitration a controversy
thereafter arising out of the contract, or the
refusal to perform the whole or any part thereof,
shall not be valid or enforceable.
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`(2) LIMITATION Nothing in this section shall
prohibit the enforcement of any written
agreement to settle by arbitration a controversy
arising out of a consumer credit contract, if such
written agreement has been entered into by the
parties to the consumer credit contract after the
controversy has arisen.'
The Senate bill languishes, some would say has been waylaid, in the
legislative process.
11 The House bill provides:
SECTION 1. SHORT TITLE.
This Act may be cited as the `Consumer Fairness Act of
1999'.
SEC.2. [sic] PROHIBITION ON ARBITRATION
CLAUSES IMPOSED ON CONSUMERS WITHOUT
THEIR CONSENT.
(a) IN GENERAL The Consumer Credit Protection Act
(15 U.S.C. 1601 et seq.) is amended by adding at the
end the following:
`TITLE X--DISPUTE RESOLUTION
`SEC. 1001. SHORT TITLE; TABLE OF CONTENTS
`(a) SHORT TITLE This title may be cited as the
`Consumer Fairness Act.'
`(b) TABLE OF CONTENTS The table of contents for
this title is as follows:
`TITLE X--DISPUTE RESOLUTION
`Sec. 1001. Short title; table of contents
`Sec. 1002. Definitions.
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`Sec. 1003. Prohibition on arbitration clauses
imposed on consumers without their consent.
SEC. 1002. DEFINITIONS.
`For purposes of this title, the following definitions shall
apply:
`(1) CONSUMER the term `consumer' means
any individual.
`(2) CONSUMER TRANSACTION The term
`consumer transaction' means the sale or rental
of goods, services, or real property, including an
extension of credit or the provision of any other
financial product or service, to an individual in a
transaction entered into primarily for personal,
family, or household purposes.
`(3) CONSUMER CONTRACT The term
`consumer contract' means any written,
standardized form contract between the parties
to a consumer transaction.
`SEC. 1003. PROHIBITION ON ARBITRATION
CLAUSES IMPOSED ON CONSUMERS WITHOUT
THEIR CONSENT.
`(a) IN GENERAL A written provision in any consumer
transaction or consumer contract which requires binding
arbitration (whether by the terms of such transaction or
contract directly or at the request of any party to the
transaction or contract) to resolve any controversy arising
out of or related to the transaction or contract, or the
failure to perform the whole or any part of the transaction
or contract shall constitute a violation of this title, shall
not be enforceable, and shall be treated as an unfair and
deceptive trade act or practice under Federal or State
Law.
`(b) POST-CONTROVERSY AGREEMENTS Subsection
(a) shall not apply with respect to a written agreement to
determine by binding arbitration an existing controversy
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¶ 25 As a result of the delay in enacting these bills into law, the victims of
these schemes have sought justice from the courts. The delay in enacting
these bills is, however, troubling.
1. Reservation of Right of Access to Courts only for CitiFinancial
¶ 26 While no Pennsylvania appellate court has yet addressed the issue of
whether an arbitration provision in a consumer contract which reserves a
right of access to the courts only for the merchant is voidable on the basis of

arising out of a consumer transaction or consumer
contract if the written agreement has been entered into
by the parties to the consumer transaction or consumer
contract after the controversy has arisen.
* * * *
The House bill, like the Senate bill of the preceding footnote, languishes in
the legislative process.
12 This court earlier considered the credit card operations of bankers/lenders
and opined:
Anyone who is perplexed that banking interests have
persuaded the Pennsylvania legislature to approve an
interest rate of 18% must surely be appalled to learn that
the banking interests have convinced the legislature of
Ohio that an interest rate of 25% is neither criminal nor
confiscatory. Don Corleone once rasped: "A lawyer with
his briefcase can steal more than a hundred men with
guns." Mario Puzo, The Godfather, p.51 (Putnam
Publishing Group 1969) one supposes that professional
courtesy precluded his allusion to the banker.
Mazaika v. Bank One N.A., 653 A.2d 640, 642 fn.3 (Pa.Super. 1994),
rev'd., 545 Pa. 115, 680 A.2d 845 (1996).
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unconscionability, a number of other jurisdictions have addressed such one-
sided arbitration provisions.
¶ 27 The Supreme Court of West Virginia, in ruling on the certified question
of
Whether an arbitration agreement entered into as part of
a consumer loan transaction containing a substantial
waiver of the consumer's rights, including access to the
courts, while preserving for all practical purposes the
lender's right to a judicial forum, is void as a matter of
law?
held:
that where an arbitration agreement entered into as part
of a consumer loan transaction contains a substantial
waiver of the borrower's rights, including access to the
courts, while preserving the lender's right to a judicial
forum, the agreement is unconscionable and, therefore,
void and unenforceable as a matter of law.
Arnold v. United Companies Lending Corp., 204 W.Va. 229, 237, 511
S.E.2d 854, 862 (1998).
¶ 28 That one-sided preservation of the right of access to the courts is
unconscionable was reiterated by the West Virginia Supreme Court when it
invalidated an arbitration provision in State of West Virginia ex rel.
Dunlap v. Berger, ___ W.Va. ___, 567 S.E.2d 265 (2002). The West
Virginia Supreme Court there noted:
Confronted with a similar provision that retained
significant rights to use the court system for a consumer
lender, but denied the right to invoke the power of the
court system to a borrower, we held in Syllabus Point 5,
Arnold v. United Companies Lending Corp., 204
W.Va. 229, 511 S.E.2d 854 (1998) that:
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Where an arbitration agreement entered into as part
of a consumer loan transaction contains a substantial
waiver of the borrower's rights, including access to
the courts, while preserving the lender's right to a
judicial forum, the agreement is unconscionable and,
therefore, void and unenforceable as a matter of law.
We agree that [respondents] retention of the right to use
the courts for its most important remedies, at the same
time that it denies that forum to Mr. Dunlap with respect
to his most important remedies, meets our established
criteria for unconscionability in the context of a contract
of adhesion, and this reason provides additional and
independently adequate grounds for our holding herein.
State of West Virginia ex rel. Dunlap v. Berger, ___ W.Va. at ___, 567
S.E.2d at ___.
¶ 29 Similarly, the Montana Supreme Court in Iwen v. U.S. West Direct,
293 Mont. 512, 977 P.2d 989 (1999), voided as unconscionable an
arbitration provision contained in a contract for advertisement in a telephone
directory. The arbitration clause provided:
Any controversy or claim arising out of or relating to this
Agreement, or breach thereof, other than an action by
Publisher for the collection of the amounts due under this
Agreement, shall be settled by final, binding arbitration in
accordance with the Commercial Arbitration Rules of the
American Arbitration Association ....
The Montana Supreme Court opined:
Consistent with our decision in Leibrand and others
which have defined contract unconscionability, this case
presents a clear example of an arbitration provision that
lacks mutuality of obligation, is one-sided, and contains
terms that are unreasonably favorable to the drafter.
Because U.S. West Direct presented this agreement on a
take-it-or-leave-it basis, it is also a contract in which
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there was no meaningful choice on the part of the weaker
bargaining party regarding acceptance of the provisions.
Certainly, this does not mean arbitration agreements
must contain mutual promises that give the parties
identical rights and obligations, or that the parties must
be bound in the exact same manner. This simply restates
the rule of law that disparities in the rights of the
contracting parties must not be so one-sided and
unreasonably favorable to the drafter, as they are in this
case, that the agreement becomes unconscionable and
oppressive. See Riccardi v. Modern Silver Linen
Supply Co., (N.Y.App.Div. 1974), 45 A.D.2d 191, 356
N.Y.S. 2d 872.
* *
Accordingly, our application of general principles that
exist at law or in equity for the revocation of any contract
leads us to conclude that the arbitration provision at issue
in this case is unconscionable. Our application of
Montana law regarding unconscionability does not
undermine the right to arbitrate which is, by the very
language of the Federal Arbitration Act, intended to
encompass only those arbitration agreements that are
not tainted by fraud, duress, or unconscionability.
Iwen v. U.S. West Direct, supra, at 522, 977 P.2d at 996.
¶ 30 The United States Court of Appeals for the Ninth Circuit found that,
under Montana law as well as under the FAA, an arbitration clause in a
franchise agreement which provided for binding arbitration of the weaker
bargaining party's claims, but allowed the stronger bargaining party the
opportunity to seek judicial remedies to enforce contractual obligations, was
unconscionable and unenforceable. Ticknor v. Choice Hotels
International, Inc., 265 F.3d 931 (9th Cir. 2001), cert. denied, __ U.S.
___, 122 S.Ct. 1075, 151 L.Ed.2d 977 (2002).
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¶ 31 The Ohio Supreme Court, in Williams v. Aetna Finance Company,
83 Ohio St. 3d 464, 700 N.E.2d 859 (1998), cert. denied, 526 U.S. 1051,
119 S.Ct. 1357, 143 L.Ed.2d 518 (1999), also refused to enforce an
arbitration clause in a consumer loan contract which preserved for the
finance company the judicial remedy of foreclosure on the debtor's mortgage
but restricted the debtor's remedies solely to arbitration.
¶ 32 Similarly, the U.S. District Court for the Northern District of California
in Acorn v. Household International, Inc., 211 F.Supp.2d 1160
(N.D.Calif. 2002), refused to enforce an arbitration provision contained in
documents executed in connection with a consumer loan where the
arbitration clause which called for arbitration pursuant to the FAA required
(1) consumers to arbitrate all of their claims, (2) preserved the corporate
lender's judicial remedies with respect to foreclosure, (3) precluded class
actions, and (4) provided for the costs of the arbitration to be paid by both
parties. The Acorn court found the one-sided provisions of the consumer
loan contract to be unconscionable and unenforceable.
¶ 33 Based on similar grounds, the California Court of Appeals in Flores v.
Transamerica Homefirst, Inc., 93 Cal. App. 4th 846, 113 Cal. Rptr. 2d 376
(Cal. App. 1st Dist. 2001), affirmed the trial court's denial, based on grounds
of unconscionability, of a petition to compel arbitration pursuant to the FAA
in an action by borrowers who had entered into a reverse mortgage. The
California Court of Appeals noted that the stronger party may not, through
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an adhesive contract, impose the arbitration forum on the weaker party
without accepting that forum for itself
"without at least some reasonable justification for such
one-sidedness based on `business realities'" [quoting
Armendariz v. Foundation Health
Psychcare
Service, Inc., 24 Cal. 4th 83, 117]. However, unless the
`business realities' that create the special need for such
an advantage are explained in the contract itself, they
must be factually established.
Flores v. Transamerica Homefirst, Inc., 93 Cal. App.4th at 855, 113
Cal.Rptr.2d at 383.
¶ 34 While we have focused upon rulings from foreign jurisdictions
sustaining challenges to arbitration clauses based on findings by those
courts that the provisions were unconscionable, the Pennsylvania appellate
courts, while not yet having addressed the precise issue at hand, are not
strangers to the doctrine of unconscionability. This Court invalidated the
replacement requirement contained in a homeowners insurance policy on the
grounds of unconscionability in Ferguson v. Lakeland Mutual Insurance
Co., 596 A.3d 883 (Pa.Super. 1991), appeal denied, 531 Pa. 639, 611
A.2d 712 (1992). The Court, in an opinion by the illustrious President Judge
Emeritus William F. Cercone noted:
[A] "court may refuse to enforce a contract or any clause
of a contract if [the] court as a matter of law deems the
contract or any clause of the contract to have been
unconscionable at the time it was made. Id. 503 Pa. at
307, 469 A.2d at 567. Inquiries concerning whether a
contract or clause is unconscionable are properly a
question of law for the court. Bishop v. Washington,
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J. A38007/01
331 Pa.Super. 387, 399, 480 A.2d 1088, 1094 (1984)
(citations omitted). With regard to such inquiries, we
also noted in Koval v. Liberty Mutual Insurance
Company, 366 Pa.Super. 415, 531 A.2d 487 (1987), as
follows:
The test of unconscionability is two-fold. First, one
of the parties to the contract must have lacked a
meaningful choice about whether to accept the
provision in question. Second, the challenged
provision must unreasonably favor the other party to
the contract.
Id. 531 A.2d at 491 (citations and quotations marks
omitted).
Ferguson v. Lakeland Mutual Insurance Co., supra, 596 A.2d at 885.
[W]e recognize the rule that a contract or a clause in a
contract is to be considered unconscionable if there is `an
absence of meaningful choice on the part of one of the
parties together with contract terms which are
unreasonably favorable to the other.' Beckman v.
Vassall-Dillworth Lincoln Mercury, Inc., 468 A.2d
784, 788-89 (1983), citing Witmer v. Exxon Corp., 495
Pa. 540, 551, 434 A.2d 1222, 1228 (1981); Williams v.
Walker-Thomas Furniture Co., 350 F.2d 445, 449
(D.C.Cir. 1965).
Metalized Ceramics for Electronics, Inc., v. National Ammonia Co.,
663 A.2d 762, 764 (Pa.Super. 1995).
¶ 35 This Court has, as well, in an opinion by our astute President Judge
Joseph A. Del Sole found that an arbitration provision which limited the
ability of the arbitrators to award consequential or punitive damages was
unconscionable and thus unenforceable under Pennsylvania law, despite the
applicability of the FAA. See: Carll v. The Terminix International Co.,
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supra. See also: Antz v. GAF Materials Corp., supra (limitations of
consequential damages in express warranty unconscionable).
¶ 36 We find that,13 under Pennsylvania law, the reservation by CitiFinancial
of access to the courts for itself to the exclusion of the consumer creates a
presumption of unconscionability, which in the absence of "business
realities" that compel inclusion of such a provision in an arbitration
provision, renders the arbitration provision unconscionable and
unenforceable under Pennsylvania law.
¶ 37 We recognize, however, that CitiFinancial has not been afforded an
opportunity to attempt to establish the existence of "business realities"
which could justify the use of such an offensive provision in a consumer
contract. We, therefore, vacate the order which dismissed the complaint
and remand to allow CitiFinancial an opportunity to establish, if it can, an
unavoidable "business reality" which precludes its use of the arbitration
forum.
2. Prohibition of Class Actions

13 We are, of course, aware of a number of rulings to the contrary. See:
e.g. Green Tree Finance Corp.-Alabama v. Randolf, 531 U.S. 79, 121
S.Ct. 513, 148 L.Ed.2d 373 (2000); Johnson v. West Suburban Bank,
225 F.3d 366 (3rd Cir. 2000), cert. denied, 531 U.S. 1145, 121 S.Ct. 1081,
148 L.Ed.2d 957 (2001); Harris v. Green Tree Finance Corp., 183 F.3d
173 (3rd Cir. 1999); Hale v. First USA Bank, N.A., 2001 U.S. Dist. LEXIS
8045 (S.D.N.Y. 2001); Marsh v. First USA Bank N.A., 103 F.Supp. 2d 909
(N.D.TX 2000); Gras v. Associates First Capital Corp., et al, 786 A.2d
886 (N.J. Super. 2001) (class action prohibition), cert. denied, 171 N.J.
445, 794 A.2d 184 (2002); In Re Conseco Finance Servicing Corp., 19
S.W. 3d 562 (Tex.App. 2000).
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¶ 38 Appellants also argue that the severable prohibition against the use of
or joinder in a class action against CitiFinancial is a violation of the public
policy of this Commonwealth since the clause "severely limit(s) borrowers'
rights to seek legal redress, and ... contravene(s) the public policies in favor
of class actions in order to efficiently resolve the claims of persons in
identical circumstances."
¶ 39 Appellants properly cite Cambanis v. Nationwide Insurance Co.,
501 A.2d 635 (Pa.Super. 1985), and Faust v. Southeastern
Transportation Authority, 756 A.2d 112, 118 (Pa.Super. 2000), appeal
denied, 565 Pa. 652, 771 A.2d 1289 (2001), in support of their claim that
class actions are favored in this Commonwealth as a means of resolving
many meritorious claims which would otherwise, due to the amounts
involved, escape prosecution. This Court, in Dickler v. Shearson Lehman
Hutton, Inc., supra, in recognition of that policy, and in light of the parties'
arbitration agreement which was silent on the availability of class actions,
directed the arbitration to proceed as a class action. See also: Stevenson
v. Commonwealth, Deputy of Revenue, 489 Pa. 1, 413 A.2d 667 (1980);
New England Energy, Inc. v. Keystone Shipping Co., 855 F.2d 1, 7 (1st
Cir. 1988), cert. denied, 489 U.S. 1077, 109 S.Ct. 1527, 103 L.Ed.2d 832
(1989); Blue Cross v. Superior Court, 67 Cal.App. 4th 42, 78 Cal. Rptr. 2d
779, 790 (1998), cert. denied, 527 U.S. 1003, 119 S.Ct. 2338, 144 L.Ed.2d
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J. A38007/01
235 (1999).14 The arbitration provision at issue herein, however, is not
silent on the subject but specifically prohibits any use of or participation in a
class action by the Lytles.
¶ 40 The U.S. Third Circuit Court of Appeals has specifically rejected an
identical challenge to the validity of an arbitration clause contained in a
consumer loan contract which precluded the use of class actions. See:
Johnson v. West Suburban Bank, 225 F.3d 366 (3rd Cir. 2000), cert.
denied, 531 U.S. 1145, 121 S.Ct. 1081, 148 L.Ed.2d 957 (2001). The
Court compelled arbitration of the plaintiff's claim under the Truth in Lending
Act, finding that the provisions in the consumer loan agreement requiring
arbitration and prohibiting class action litigation provisions which mirror
the Lytles contract did not violate the public policy evidenced by the Truth
in Lending Act. The Third Circuit found:
The sums available in recovery to individual plaintiffs are
not automatically increased by use of the class forum.
Indeed, individual plaintiff recoveries available in a class
action may be lower than those possible in individual
suits because the recovery available under TILA's
statutory cap on class recoveries is spread over the entire
class. Nor will arbitration necessarily choke off the supply
of lawyers willing to pursue claims on behalf of debtors.
Attorneys' fees are recoverable under the TILA, see 15
U.S.C. § 1640(a)(3), and would therefore appear to be

14 A number of courts have held that arbitration, being a matter of
agreement between the parties, cannot proceed as a class action unless the
arbitration agreement specifically provides for such a procedure. See, e.g.,
Balfour, Guthrie and Co. v. Commercial Metals Co., 93 Wn.2d 199, 202,
607 P.2d 856, 857 (1980); Champ v. Siegel Trading Co., Inc., 55 F.3d
269 (7th Cir. 1995).
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recoverable in arbitration, as arbitrators possess the
power to fashion the same relief as courts. [footnote
omitted] In sum, though pursuing individual claims in
arbitration may well be less attractive than pursuing a
class action in the courts, we do not agree that
compelling arbitration of the claim of a prospective class
action plaintiff irreconcilably conflicts with TILA's goal of
encouraging private actions to deter violations of the Act.
Johnson v. West Suburban Bank, supra, 225 F.3d at 374.
¶ 41 While we are not bound by the decision of the Johnson court, the
record before us is devoid of any evidence that would establish that the
damages claimed by appellants are insufficient to permit the Lytles to seek
legal redress for their injuries in the absence of a class action. In the
absence of such evidence, this challenge to the prohibition against class
actions as a violation of public policy must fail. However, upon remand, the
trial court, pursuant to Pa.R.Civ.P. 1028(c)(2), may also receive and
consider evidence relevant to the Lytles' argument that the costs associates
with individual versus class-based litigation of their claim against
CitiFinancial would, in light of the amount of their damages, result in
continuing immunity for CitiFinancial for its wrongful acts.
3. Cost of Arbitration Process as Unconscionable
¶ 42 Appellants may also offer evidence on remand to attempt to establish
that the costs associated with the arbitration of their single claim against
CitiFinancial would operate to preclude them from pursuing a remedy for the
wrongs allegedly perpetrated by CitiFinancial.
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¶ 43 The Court of Appeals of Washington, in Mendez v. Palm Harbor
Homes, Inc., 111 Wn. App.446, 45 P.3d 594 (2002), recently authorized
the use, in the State of Washington, of "an equitable and legal prohibitive
cost defense to contractually agreed arbitration ... ." Id. at 450, 45 P.3d at
597. The Mendez Court, in a compelling rationale for its holding, noted:
Significantly, Green Tree allows a "prohibitive cost"
defense to arbitration. Some courts applying Green Tree
have discussed the defense in terms of unconscionability.
See Ting v. AT&T , 182 F.Supp. 2d 902, 933 (N.D.Cal.
2002) (substantive unconscionability); In re First Merit
Bank, 52 S.W. 3d at 756 (unconscionability). By
contrast, at least one court viewed the defense as one
standing alone and apart from the unconscionability
analysis. Camacho, 167 F.Supp.2d at 896 n.2. A
number of quite recent cases discussing the Green Tree
prohibitive cost defense illustrate how this new defense
applies to contractual arbitration clauses like the one
involving Mr. Mendez.
* * * *
Very recently, a federal district court in California held
AT&T's AAA arbitration provisions unconscionable because
they placed prohibitive costs on complaining customers
attempting to vindicate their claims. Ting, 182
F.Supp.2d at 934-35. The Ting court noted the average
daily rate of compensation for an arbitrator in Northern
California was $1,899. Id. at 934. Considering the
average rate of compensation and various filing fees,
administrative fees, and deposits, the Ting court
determined that "a class member's potential cost before
arbitration begins would be $5,800." Id. "Filing that suit
in a court, which she supports with her taxes, would
generally cost her under $200 in California." Id. "Having
to advance such substantial sums will deter many
litigants from proceeding." Id. (citing Phillips, 179
F.Supp. 2d at 846-47).
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Given the light shed by these recent authorities, we
conclude Mr. Mendez has met his burden to show
prohibitive costs. Similar to the facts in Phillips, Palm
Harbor does not dispute Mr. Mendez could not "afford the
costs associates with arbitration." Phillips, 179
F.Supp.2d at 846.
Washington's policy favoring arbitration is grounded on
the proposition that arbitration allows litigants to avoid
the formalities, expense, and delays inherent in the court
system. Perez v. Mid-Century Ins. Co., 85 Wn.App.
760, 765, 934 P.2d 731 (1997). This policy is defeated
when an arbitration agreement triggers costs effectively
depriving a plaintiff of limited pecuniary means of a forum
for vindicating claims. Green Tree, 531 U.S. at 90; see
also
RICHARD M. ALDERMAN, Pre-Dispute
Mandatory Arbitration in Consumer Contracts: A
Call for Reform, 38 Hous.L.Rev. 1237 (2001); SHELLY
SMITH, COMMENT, Mandatory Arbitration Clauses in
Consumer Contracts: Consumer Protection and the
Circumvention of the Judicial System, 50 DePaul
L.Rev.1191, 1220 (2001) (contending large corporations
use arbitration clauses as a shield to prevent consumers
from accessing the judicial system to enforce their
statutory rights).
Here, it is reasonably sure by prima facie proof that Mr.
Mendez would have been required to spend up front well
over $2,000 to try to vindicate his rights under a contract
to buy a $12,000 item in order to resolve a potential
$1,500 dispute. Avoiding the public court system to save
time and money is a laudable societal goal. But, avoiding
the public court system in a way that effectively denies
citizens access to resolving everyday societal disputes is
unconscionable. Goals favoring arbitration of civil
disputes must not be used to work oppression. When the
goals given in support of contract clauses like this are
used as a sword to strike down access to justice instead
of as a shield against prohibitive costs, we must defer to
the overriding principle of access to justice.
In sum, for the first time in Washington, we recognize a
variation of the Green Tree prohibitive cost defense to
the enforcement of an arbitration agreement under
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chapter 7.04 RCW. Under this defense, an arbitration
agreement may be stricken when the party opposing
arbitration reasonably shows in law or equity that
prohibitive costs are likely to render the arbitral forum
inaccessible.
Mendez v. Palm Habor, supra, 111 Wn. App. at 462-465, 45 P.3d at 603-
605. See also: Cooper v. MRM Investment Co., supra; Camacho v.
Holiday Homes, Inc., 167 F.Supp.2d 892 (W.D.Va. 2001); Ball v. SFX
Broadcasting, Inc., 165 F.Supp.2d 230 (N.D.NY 2001); State of W.
Virginia ex rel Dunlap v.Berger, supra.
¶ 44 As noted in the foregoing discussion, we vacate the order which
dismissed the Lytle's complaint and further remand to enable the trial court
to conduct a hearing upon the issue of the unconscionability of the
arbitration provision, specifically, the existence of a business reality which
precluded CitiFinancial from agreeing to be bound by the arbitration
provisions. In the absence of such evidence, the trial court must overrule
the preliminary objections15 that were based on the arbitration clause.
¶ 45 If CitiFinancial presents a compelling basis for the one-sided
arbitration clause, appellants are to be afforded an opportunity to present
evidence on the issue of the cost of arbitration as contrasted to court
proceedings and the ability of consumers such as the Lytles to obtain relief

15 Such a result will, of course, render the related issues concerning the
costs associated with arbitration and the viability of the prohibition against
class actions moot.
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in the absence of a class action from so predatory a consumer contract as
the underlying agreement crafted by appellee.
¶ 46 Order vacated. Case remanded. Jurisdiction relinquished.
¶ 47 Judge Joyce concurs in the result.
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