An arbitration agreement in a consumer contract with tiny 6-point type and a host of other unacceptable provisions was deemed “unconscionable” by a California Court of Appeal when it upheld a lower court’s denial of appellant’s petition to compel arbitration.

Acting Presiding Judge Jon P. Streeter of the First District Court of Appeal, writing for a unanimous court on July 27, voided the arbitration agreement that plaintiff Jonathan Fisher signed with MoneyGram International, a global financial company that transfers customers’ money across the globe. His opinion began with a list of the agreement’s problems. These included hiding unreasonable conditions in tiny type on the back side of a money transfer form, reducing the time of the statute of limitations, increasing arbitrator’s fees, and requiring that users bear the cost of experts and attorneys.

Plaintiff Fisher is a 63-year-old Vietnam veteran with poor eyesight. He purchased his money transfers at two different Walmart stores, one of the sites where MoneyGram regularly conducts business. Fisher wanted to send a total of $3,530 to Louisiana and Georgia. These transactions required him to fill in and sign MoneyGram Money Transfer Forms that included basic information about him and the intended destinations of the funds. The funds were processed and delivered.

Fisher claimed that his fund transfers were “induced by scammers” that MoneyGram knew about but failed to do anything to warn or prevent consumers from using. These scammers promised users large sums of money from sources such as lotteries, inheritances, grants or loans if they would send a small amount of money to the scammer, who said the funds represented taxes, fees, “or some other concocted story.”

While at Walmart, Fisher never turned MoneyGram’s forms over to read the provisions on the other side. That was where the scam, which had already been enjoined by the Federal Trade Commission (FTC), began. Since 2009, Walmart had been ordered to “establish, implement, and maintain a comprehensive anti-fraud program” to protect its customers who want to use MoneyGram’s convenient locations to transfer money. They have not done so.

Even if Fisher had turned over MoneyGram’s forms, it probably would not have made any difference. On the back, in what the court called “illegible” 6-point type, was a list of what the court called “unconscionable provisions.” In addition, Streeter said, “But even if he had tried to read the tiny print, he would not have been able to do so—even wearing his trifocal glasses—at least not without a magnifying glass.”

Fisher’s lawsuit began in 2019 when he decided to use MoneyGram’s transfer services in two Walmart stores. Unlike other transfer companies, which place temporary holds on transfers to prevent fraud, MoneyGram sends funds immediately. Fisher’s complaint argued that MoneyGram does not tell consumers about the fraud that has been enjoined by the FTC, even though the company is well aware of the fraudulent practices. He also said he was representing a class of “all other similarly situated persons. He sought restitution, an injunction and other relief.

Rather than moving forward with Fisher’s lawsuit, MoneyGram tried to enforce the illegible arbitration agreement that Fisher had signed. Fisher denied that he had given “informed consent.” MoneyGram responded that it had been given and also told the court that it could “sever” any provisions that the court considered unacceptable.

The case was heard by Judge Winifred Y. Smith of Alameda County Superior Court on August 16, 2019, when she denied MoneyGram’s petition to require arbitration because the type size and other provisions were “procedurally unconscionable” and could not be severed from the agreement. In upholding Smith’s ruling, the appeals court began by defining unconscionability and explaining its standard of review.

“Unconscionability,” Streeter wrote, 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 party.” Under California law, an order denying a petition is presumed to be correct by substantial evidence and here, MoneyGram would have to carry the burden of proof. It could not do so.

The court further explained that the procedural requirements of unconscionability in adhesion contracts are “oppression and surprise.” Adhesion contracts are defined as those that are “preprinted” and offered to consumers on “a take-it-or-leave-it basis,” as was the case here. But adhesion contracts alone do not satisfy unconscionability. The contract’s terms must also be reviewed to determine if they are “materially unfair or one-sided.” They were found to be so.

MoneyGram’s contention that its contract provisions were not surprising also failed. Fisher presented an expert witness in typography who said MoneyGram’s contract was “virtually illegible based on a confluence of tiny print, faint contrast, thin characters, narrow spacing of words and lines, and exceptionally long lines with practically no margins.” The court found that the legibility of the type size relates to “how surprised the consumer might be to learn what it says.” Streeter, however, stated that he was not imposing an “across-the-board” prohibition of 6-point type in contracts. The court did not specifically address Fisher’s poor eyesight as it related to type size.

After a lengthy discussion of proper type sizes in contracts, the court turned to the other unacceptable arbitration elements: the shortened statute of limitations; the insistence on a more expensive arbitrator; and the requirement that each party bear the cost of its own attorneys and experts. Streeter found none of these acceptable either.

Several current cases discuss appropriate type size in arbitration agreements, but neither cases nor legislators have yet promulgated a specific rule. Until a larger point size is required, consumers should understand that signing a contract without reading or understanding it is a big mistake. So, read and question dubious provisions before signing, even if a magnifying glass is needed to do so.