Consumer Protection and the Illusory Promise of the Unconscionability Defense

Abstract

The United States Supreme Court’s notorious decision in AT&T Mobility LLC v. Concepcion seems to display impatience with the idea of an unconscionability defense to the enforcement of a contract. At the core of Justice Antonin Scalia’s opinion, however, was not an argument against the idea of unconscionability per se, but an argument against using “unconscionability” as a cover for a broader public policy agenda. This interpretation is confirmed by the Court’s little-known decision in Marmet Health Care Ctr., Inc. v. Brown, handed down the term after Concepcion was decided. Plaintiffs were allowed to move forward in Marmet because the Court acknowledged they might have an authentic unconscionability defense separate from their public policy defense.

Despite Concepcion’s undeniably negative impact on consumer rights, the little-known Concepcion-Marmet sequence contains a crucial lesson for progressive contract scholars today. The distinction between public policy and unconscionability defenses in contract is not just nitpicking; far from it. In a legal world dominated by online clickwrap and wildly asymmetrical bargaining power, a central question for contract law today is what sorts of defenses can stop boilerplate from eviscerating consumers’ rights? Many judges and law professors – and indeed the American Law Institute in its new Restatement of Consumer Contracts – have proposed “the unconscionability defense” as the best answer. But as we illustrate in this essay, that answer will be a catastrophe for consumers, just as it was in Concepcion. The conventional justification of unconscionability requires a showing of shocking injustice for the litigants before the court, and is thus highly individualized. The problems with a wide array of boilerplate contracts are not the harshness or oppressiveness suffered by single litigants, and those subject to their terms cannot depend on individual litigation or arbitration. Courts’ best reasons for declining to enforce the various waivers, disclaimers, and limitations that repeat-player actors force on consumers today turn on public welfare and market forces. For centuries, courts have enjoyed substantial if measured competency to regulate contracts with such goals in mind – that is what “public policy” defenses are about. Calling these “unconscionability” arguments, we argue, is both a doctrinal error and a strategic blunder, because it obscures rather than highlights the power inherent in our common law courts to structure the kinds of obligations to one another the law is willing to enforce.

Keywords: consumer protection, unconscionability, public policy, AT&T Mobility LLC v. Concepcion, Restatement of Consumer Contracts, waivers, boilerplates, arbitration, FAA, American Law Institute