Jacob Russell has a bone to pick with the contract professoriate, who have consigned unconscionability to a backwater in our courses, trotted out today only in 9th circuit cases that excoriate arbitration clauses before being consigned to an inevitable Supreme Court reversal. In his excellent new draft paper, Russell aims to show that true unconscionability—“rotten deal unconscionability”—didn’t die with the 1960s and 1970s but remains a vibrant part of today’s contracting landscape. The paper offers a compelling account of the functioning of an oft-derided doctrine, and even better, the grist for an enriched classroom exploration of the ways that courts deal with inequality in exchange. You should read it.
The heart of the paper is a caselaw survey, mostly of state court cases that follow the Great Recession. Hiding, as it were, in plain sight, Russell finds dozens of cases in which courts simply are rejecting deals because they were unequal: interests rates too high, foreclosures procured from vulnerable borrowers, routine overdraft fees on debit cards, and payday loans. Two common themes emerge, both remarkable given the doctrine’s repute: the cases involved “common products…sold by mainstream players in the credit industry,” and the courts themselves characterized the remedies as “routine.” Or to put it differently, unconscionability seemingly is routinely disrupting deals at the center of our credit markets. Why, then, are contract professors convinced that substantive unconscionability is a dead letter?
Russell argues that the conventional wisdom can be “slow to update,” especially when it is built on the backs of contracts casebooks. Second, and here Russell is “necessarily speculative,” perhaps there has been a post-crisis uptick in bad-deal unconscionability which changed how judges saw them. He argues that this change is reflected in the common treatment of unconscionability in consumer protection legislation, and in the American Law Institute’s (ALI) new proposed Restatement of Consumer Contracts, which would go beyond the caselaw in making the doctrine available when terms are not salient.
After describing this stealthy source of unconscionability cases, Russell attempts to give the doctrine more content by discussing its tailoring. That is, which consumer should courts have in mind when applying the doctrine, the “subjective, specific individual sitting in front of the court,” “a typical consumer,” or “somewhere in between.” As Russell points out, the choice of tailoring can be outcome-determinative, but it is rarely discussed explicitly, either by courts or scholars.
Russell argues that particularly in a world of individualized digital contracting, judicial inquiry, too, ought to be targeted at the consumer in the room. That’s so because he believes that unconscionability’s true purpose is “policing merchant misbehavior, not preventing consumer harm.” Russell would cabin the doctrine to those merchants who “know, or should have known, that their contacts were unfair or extremely inappropriate for the consumer,” evaluated ex post. In this way, courts could act as flexible agents for market-wide consumer protection, and might be able to alleviate some of the problems that mass-digitization of contracting has created.
The article thus makes a big move, offering readers a new take on how to police individualized contracts. While I was not entirely convinced of the tailoring story, my priors about unconscionability’s incidence and nature were updated. I won’t be teaching the doctrine the same way again. I like it lots.