Jason Lhotka was thirty-seven years old when he died of an altitude-related illness while on a GeoEx [Geographic Expeditions, Inc.] expedition up Mount Kilimanjaro with his mother, plaintiff Sandra Menefee. GeoEx’s limitation of liability and release form, which both Lhotka and Menefee signed as a requirement of participating in the expedition, provided that each of them released GeoEx from all liability in connection with the trek and waived any claims for liability “to the maximum extent permitted by law.” The release * * * reads: “I understand that all Trip Applications are subject to acceptance by GeoEx in San Francisco, California, USA. I agree that in the unlikely event a dispute of any kind arises between me and GeoEx, the following conditions will apply:

(a) the dispute will be submitted to a neutral third-party mediator in San Francisco, California, with both parties splitting equally the cost of such mediator. If the dispute cannot be resolved through mediation, then

(b) the dispute will be submitted for binding arbitration to the American Arbitration Association in San Francisco, California;

(c) the dispute will be governed by California law; and (d)

the maximum amount of recovery to which I will be entitled under any and all circumstances will be the sum of the land and air cost of my trip with GeoEx. I agree that this is a fair and reasonable limitation on the damages, of any sort whatsoever, that I may suffer. I agree to fully indemnify [compensate] GeoEx for all of its costs (including attorneys’

fees) if I commence an action or claim against GeoEx based upon claims I have previously released or waived by signing this release.”

Menefee paid $16,831 for herself and Lhotka to go on the trip.

A letter from GeoEx president James Sano that accompanied the limitation of liability and release explained that the form was mandatory and that, on this point, “our lawyers, insurance carriers and medical consultants give us no discretion. A signed, unmodifi ed release form is required before any traveler may join one of our trips.

* * * My review of other travel companies’ release forms suggests that our forms are not a whole lot different from theirs.”

After her son’s death, Menefee sued GeoEx for wrongful death and alleged various theories of liability including fraud, gross negligence and recklessness, and intentional infl iction of emotional distress.

GeoEx moved to compel arbitration.

The trial court found the arbitration provision was unconscionable

* * * and on that basis denied the motion. It ruled: “The agreement at issue is both procedurally and substantively unconscionable * * * .

This appeal timely followed.

* * * *

We turn * * * to GeoEx’s contention that the court erred when it found the arbitration agreement unconscionable. Although the issue arises here in a relatively novel setting, the basic legal framework is well established.

“Unconscionability has generally been recognized to include 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. Phrased another way, unconscionability has both a procedural and a substantive element. The procedural element requires oppression or surprise. * * * The substantive element concerns whether a contractual provision reallocates risks in an objectively unreasonable or unexpected manner.” * * * [Emphasis added.]

GeoEx argues the arbitration agreement involved neither the oppression nor surprise aspects of procedural unconscionability.

GeoEx argues the agreement was not oppressive because plaintiffs made no showing of an “industry-wide requirement that travel clients must accept an agreement’s terms without modifi cation” and “they fail[ed]

even to attempt to negotiate” with GeoEx. We disagree. GeoEx’s argument cannot reasonably be squared with its own statements advising participants that they must sign an unmodifi ed release form to participate in the expedition; that GeoEx’s “lawyers, insurance carriers and medical consultants give [it] no discretion”

on that point; and that other travel companies were no different. In other words, GeoEx led the plaintiffs to understand not only that its terms and conditions were nonnegotiable, but that plaintiffs would encounter the same requirements with any other travel company. This is a suffi cient basis for us to conclude the plaintiffs lacked bargaining power.

GeoEx also contends its terms were not oppressive, apparently as a matter of law, because Menefee and Lhotka could have simply decided not to trek up Mount Kilimanjaro. It argues that contracts for recreational activities can never be unconscionably oppressive because, unlike agreements for necessities such as medical care or employment, a consumer of recreational activities always has the option of [forgoing]

the activity. The argument has some initial resonance [signifi cance], but on closer inspection we reject it as unsound.

* * * *

Here, certainly, plaintiffs could have chosen not to sign on with the expedition. That option, like any availability of market alternatives, is relevant to the existence, and degree, of oppression. But we must also consider the other circumstances surrounding the execution of the agreement. GeoEx presented its limitation of liability and release form as mandatory and unmodifi -

able, and essentially told plaintiffs that any other travel provider would impose the same terms. “Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice * * * .” GeoEx presented its terms as both nonnegotiable and no different than what plaintiffs would fi nd with any other provider. Under these circumstances, plaintiffs made a suffi cient showing to establish at least a minimal level of oppression to justify a fi nding of procedural unconscionability.

[Emphasis in original.]

* * * [We now] address whether the substantive unconscionability of the GeoEx contract warrants the trial court’s ruling.

* * * *

The arbitration provision in GeoEx’s release * * * guaranteed that plaintiffs could not possibly obtain anything approaching full recompense for their harm by limiting any recovery they could obtain to the amount they paid GeoEx for their trip. In addition to a limit on their recovery, plaintiffs, residents of Colorado, were required to mediate and arbitrate in San Francisco—all but guaranteeing both that GeoEx would never be out more than the amount plaintiffs had paid for their trip, and that any recovery plaintiffs might obtain would be devoured by the expense they incur in pursuing their remedy. The release also required plaintiffs to indemnify GeoEx for its costs and attorney fees for defending any claims covered by the release of liability form. Notably, there is no reciprocal limitation on damages or indemnifi cation obligations imposed on GeoEx. Rather than providing a neutral forum for dispute resolution, GeoEx’s arbitration scheme provides a potent disincentive for an aggrieved client to pursue any claim, in any forum—

and may well guarantee that GeoEx wins even if it loses. Absent reasonable justifi cation for this arrangement—

and none is apparent—we agree with the trial court that the arbitration clause is so one-sided as to be substantively unconscionable.

* * * *

The order denying GeoEx’s motion to compel arbitration is affi rmed.

Questions:-

1. What did the judge mean when he said that GeoEx’s one-sided arbitration scheme “may well guarantee that GeoEx wins even if it loses”?

2. Did the fact that the terms of the release were nonnegotiable contribute to its procedural unconscionability or its substantive unconscionability? Explain.