David G. Walther v. Sovereign Bank

Summary

The court held that the arbitration clause in the borrowers’ second-mortgage loan agreement was valid and enforceable because it was conspicuous, was not procedurally or substantively unconscionable, and did not improperly waive the borrowers’ jury-trial or class-action rights. The court also held that the bank did not waive arbitration by filing a single responsive pleading seeking to compel arbitration while alternatively requesting dismissal or a stay, because no merits adjudication, discovery, or significant litigation occurred. Chief Judge Bell, joined by Judge Greene, dissented, concluding that the lender’s unilateral access to judicial remedies and the practical effect of the class-action waiver made the clause unconscionable.