Consumers With Neanderthal DNA And A Bone To Pick With 23andMe Will Need To Bring Their Clubs To Arbitration.

The Neanderthal man, member of the hunting race inhabiting central France in Mousterian times.  Philip Brigandi, photographer.  1924.  Library of Congress. 

        Tompkins v. 23andMe, Inc., No 14-16405 (9th Cir. Aug. 23, 2016) (Ikuta, Trott; Watford, conc.) provides a well-stocked arsenal for eviscerating claims that arbitration is unconscionable in a consumer contract.  The Ninth Circuit panel, in an opinion authored by Judge Ikuta, affirmed the district court’s order granting 23andMe, Inc.,’s¹ motion to compel arbitration, over arguments that the arbitration provision was unconscionable.

       The bilateral attorneys’ fees shifting clause was not found to be unconscionable.  The Court relied on Sanchez v. Valencia Holding Co., LLC, 61 Cal.4th 899 (2015) [see our August 4, 2015 post], which requires a case-specific analysis of the consumer’s ability to pay, and found the plaintiffs had not carried the burden of showing that they couldn’t pay, or that their ability to arbitrate had been thwarted.  The San Francisco forum was reasonable – that’s where 23andMe is headquartered, and plaintiffs were in California.  The provision excluding intellectual property claims from mandatory arbitration was not unconscionable because the corporation had a reasonable justification for the arrangement.  A one-year statute of limitations did not make the arbitration provision unconscionable, nor did a unilateral right to modify the agreement make the provision unconscionable – the covenant of good faith and fair dealing reins in the modification that can be made unilaterally.

        COMMENT:  Judge Ikuta also relied on language in the recent case,  Baltazar v. Forever 21, Inc., 62 Cal. 4th 1237 (2016) [see our March 28, 2016 post]:  “[A] contract can provide for a margin of safety that provides the party with superior bargaining strength a type of extra protection for which it has a legitimate commercial need without being unconscionable.”  Id. at 1250.  Look for more corporations with superior bargaining strength to rely on this language in consumer and employment disputes, when defending against claims that the arbitration clause they drafted is unconscionable. 

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¹23andMe has been the subject of class action lawsuits claiming it has made misleading statements about the validity of its tests.