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NO. 5-03-0691

IN THE

APPELLATE COURT OF ILLINOIS

FIFTH DISTRICT

JUSTICE KUEHN delivered the opinion of the court:

This appeal stems from the trial court's October 7, 2003, order denying the defendants'motion to compel arbitration and stay judicial proceedings. The contract provision at issueprovides that the majority of the claims between the parties "shall be settled by bindingarbitration in accordance with the Commercial Arbitration Rules of the American ArbitrationAssociation ('Rules')" and that "[a] judgment upon the award rendered by the arbitrator maybe entered in any court of competent jurisdiction." The trial court essentially concluded thatthe arbitration clause at issue was unenforceable and unconscionable and, further, that theparties had intended that claims for small amounts should be litigated in small claims court. This appeal is before this court pursuant to Supreme Court Rule 307(a)(1) (188 Ill. 2d R.307(a)(1)), because the motion denied sought injunctive relief.

Verizon Wireless⁽¹⁾ is a provider of various wireless services, including cellular phoneservices. To become a Verizon customer, Verizon required each prospective customer tosign a Verizon contract. The typical Verizon contract was for a 12- or 24-month serviceterm. If the Verizon customer decided for whatever reason to terminate the contract beforethe service term's natural expiration, the Verizon contract in question required the Verizoncustomer to pay a $175 early cancellation penalty. There was no sliding scale relative tocancellation of the Verizon contract. In other words, regardless of when the contract wascanceled, the fee was $175.

The Verizon contract also contained an arbitration clause, stating as follows:

"Any controversy or claim arising out of or relating to this Agreement, otherthan a claim by Verizon Wireless as to non[]payment, shall be settled by bindingarbitration in accordance with the Commercial Arbitration Rules of the AmericanArbitration Association ('Rules'), and judgment upon the award rendered by thearbitrator may be entered in any court of competent jurisdiction. Each party shallbear their own costs of arbitration[] and shall split the cost of the arbitrator betweenthem."

Dawn M. Zobrist was a Verizon customer beginning in July 2001, at which time sheelected to enter into a two-year service plan. She terminated her relationship with Verizonin March 2002. Because she did not complete her two-year service plan, Verizon billed herthe $175 cancellation penalty in her final, April 2002 statement. Dawn M. Zobrist (theplaintiff) paid this cancellation penalty "under protest."

On August 9, 2002, the plaintiff brought a lawsuit against Verizon. She suedindividually and as the representative of a purported class of similarly situated individuals. Specifically, the plaintiff's proposed class included "[a]ll persons in Illinois who were billedan 'Early Cancellation Fee' (or substantially similar termination or cancellation fee) byVerizon Wireless when they cancelled their agreement before the end of its Service Term." Specifically excluded from this purported class were "the Verizon Wireless defendants, anyentity in which they have a controlling interest, any of their parents, subsidiaries, affiliates,officers, directors, employees and members of their immediate families[,] and members ofthe Illinois state court judiciary and their immediate families."

A first amended complaint was filed on March 14, 2003. One week later, Verizonfiled a motion to compel arbitration and stay judicial proceedings. On October 7, 2003, thetrial court denied the motion without holding an evidentiary hearing. Verizon appeals thatorder. That order thoroughly detailed the trial court's rationale. The trial court found thearbitration clause to be unenforceable because the proposed class action sought to haveclaims decided that went beyond the dictates of the arbitration clause and would thwart theplaintiff's right to obtain attorney fees pursuant to the Illinois Consumer Fraud and DeceptiveBusiness Practice Act (815 ILCS 505/1 et seq. (West 2000)) and because arbitration of theplaintiff's claims would be prohibitively expensive. The trial court also found the arbitrationclause to be both procedurally and substantively unconscionable. The proceduralunconscionability was found in the fact that the arbitration clause was within a brochureseparate from the cellular contract the plaintiff signed. The trial court concluded that thearbitration clause was substantively unconscionable because it was one-sided and harsh. Finally, the trial court concluded that the language of the contract supported the conclusionthat the parties intended for claims of this type to be litigated in small claims court.

Thereafter, Verizon filed a motion to reconsider this order in the trial court, on thebases that it had no notice that the court's order had been drafted by counsel for the plaintiffand that it had been denied an opportunity to respond to and point out substantive errorscontained within the order. The trial court has not yet ruled upon this motion.

In an appeal from a denial of a motion to compel arbitration without an evidentiaryhearing, the standard of review is de novo. Travis v. American Manufacturers MutualInsurance Co., 335 Ill. App. 3d 1171, 1174, 782 N.E.2d 322, 325 (2002).

In 1925, Congress enacted the Federal Arbitration Act (FAA) (now 9 U.S.C.