Every rare now and again I read a court opinion packed with good-old-fashioned common sense. The opinion in this case was one of those.

Let me set the stage for you very quickly. Plaintiffs’ lawyers have discovered that car dealers and finance companies are easy pickings when it comes to suits by consumers. Car dealers and finance companies have discovered that arbitration agreements are a very potent first line of defense against such suits, particularly against class action lawsuits. Plaintiffs’ lawyers don’t just roll over and play dead when they encounter an arbitration agreement. No siree! They try every trick in the book to convince the court that the arbitration agreement their client signed shouldn’t be enforced.

That’s what this opinion involved.

Sharan Battle and Tamara Johnson were the named plaintiffs in a putative class action lawsuit against Nissan Motor Acceptance Corporation, alleging claims under the federal Equal Credit Opportunity Act, the Wisconsin Deceptive Trade Practices Act and the Wisconsin Consumer Act, as well as a claim of intentional and strict liability misrepresentation.

NMAC moved to compel arbitration and stay proceedings based on arbitration clauses contained in the retail installment sales agreements the plaintiffs signed when they bought their cars. The court granted NMAC's motion as to Johnson, but denied it as to Battle after concluding that Battle's contract did not contain an arbitration provision (note to dealership manager – time to throw away those old forms).

In granting NMAC's motion as to Johnson, the court rejected Johnson's arguments that the arbitration agreement was not supported by consideration, violated the Wisconsin Consumer Act, and was procedurally and substantively unconscionable.

Let’s look at each of these challenges.

There’s a concept in contract law that a contract has to be supported with consideration. That means that each party to the contract has to do, or promise to do, something it isn’t otherwise obligated to do, or, alternatively, that each party has to refrain from doing, or promise to refrain from doing, something it would otherwise be entitled to do. The consideration does not have to be of any great value – law school professors often used the example of a peppercorn as consideration.

Johnson argued that there was no consideration to support her agreement to arbitrate. “Wait,” said Johnson, “There has to be separate consideration – apart from the consideration supporting the contract of sale – to support the agreement to arbitrate.” The court wasn’t buying that either, and held that no separate consideration was required for the arbitration agreement because the consideration relating to the purchase transaction supported the arbitration provision as well. Anyway, said the court, the parties' mutual promises to arbitrate constituted sufficient consideration. That is obviously the correct analysis.

Johnson next argued that the state laws under which she was suing provided her access to the courts to redress her grievances and that the state law prohibited the waiver of that right. The court wasn’t buying this one either, pointing out that the Federal Arbitration Act trumps any state laws that would prohibit arbitration of disputes (the concept the court was enunciating was one called “federal supremacy”).

Next, Johnson dragged out one of the most frequent challenges that we see from plaintiffs seeking to avoid arbitration – unconscionability. What a plaintiff is saying when she argues that a transaction or an agreement is unconscionable is that it is grossly unfair. Courts usually say that an unconscionable agreement must be procedurally unfair – that something leading to the formation of the agreement made it unfair – and that it must be substantively unfair – something in the agreement is so overbearing that it shouldn’t be enforced.

Johnson’s procedural unconscionability claim was that she and the dealer were in unequal bargaining positions. Her substantive unconscionability claim was that the contract required her to forego a court or jury trial of her claims and waive class action remedies, while preserving to NMAC a judicial forum for small claims actions and the right of repossession.

The court rejected Johnson's procedural unconscionability claim, noting she was free to buy a car and find financing from many sources. It rejected her substantive unconscionability claim, noting that the arbitration agreement provided that in exchange for her giving up her class rights NMAC would pay a part of her arbitration costs and would arbitrate in her federal judicial district.

Good grief, Charlie Brown. A sensible judge renders a thoughtful and well-analyzed opinion. What’s the world coming to?

Battle v. Nissan Motor Acceptance Corporation; Case No. 05-C-0669, (E.D.Wis.) March 9, 2006