[No. 81006-1. En Banc.]
Argued March 13, 2008. Decided August 28, 2008
Scott M. Kane, F. Paul Bland, Jr., and Leslie A. Bailey (of Public Justice, PC, of counsel), for respondent.
Robert M. McKenna, Attorney General, and Katherine M. Tassi, Assistant, on behalf of the Attorney General's Office, amicus curiae.
Kelby D. Fletcher, Sarah C. Schreck, and Bryan P. Harnetiaux on behalf of Washington State Trial Lawyers Association Foundation, amicus curiae.
Author: Justice Tom Chambers. WE CONCUR: Chief Justice Gerry L. Alexander, Justice Charles W. Johnson, Justice Barbara A. Madsen, result only, Justice Richard B. Sanders, Justice Susan Owens, Justice Mary E. Fairhurst, Justice James M. Johnson, Justice Anne L. Ellington.
En Banc
¶1 CHAMBERS, J. -- Michael McKee filed this class action suit, alleging AT&T wrongly charged him (and others) city utility surcharges and usurious late fees. When the Chelan County Superior Court found the dispute resolution provision of AT&T's "Consumer Services Agreement" unconscionable and denied its motion to compel arbitration, AT&T appealed. The Court of Appeals, Division Three, certified the case to this court. We affirm the trial court and remand for further proceedings.
FACTS
¶2 McKee lives near Wenatchee, Washington, and signed up for AT&T long distance phone service in November 2002. His monthly bills included a Wenatchee city utility tax surcharge, even though he lives outside the Wenatchee city limits. When he called AT&T to resolve this issue, at first, the various operators merely tried to sell him a new long distance package. Finally, he was told that taxes were assessed by zip code. Unfortunately, McKee's zip code includes people who live both inside and outside the Wenatchee city limits. McKee contends that AT&T collects the tax from all of its customers who live within the zip code, whether the customers owe the tax or not. A late fee of 1.5 percent applies if the customer does not pay all charges on time. The charges McKee challenges amount to no more than $ 2 in any given month, less than $ 20 total in a year. But McKee notes that after many years and many customers, small amounts add up to very large sums.
¶3 After his individual attempts to resolve his billing issues with AT&T failed, McKee filed this class action lawsuit, alleging violations of Washington's Consumer Protection Act, chapter 19.86 RCW, and Washington's usury statute, chapter 19.52 RCW, as well as negligence and breach of contract. AT&T removed the action to federal district court, claiming McKee had raised federal law in his complaint. After the complaint was amended to omit any reference to federal law, the federal court remanded the case back to Chelan County Superior Court.
¶4 AT&T then moved to compel arbitration under its Consumer Services Agreement. At the time McKee agreed to use AT&T as his long distance provider, he did not sign any agreement with AT&T and was not informed of any terms and conditions associated with AT&T service. After he began using AT&T, it sent him mail, which may have included a contract. He had not retained any of the mail and did not know the terms of his agreement with AT&T. In support of the motion to compel arbitration, AT&T employees Howard Spierer and April Morlock filed declarations averring that a specific agreement was sent to McKee in November as part of his "fulfillment package" and attached a copy of that agreement to their declarations. We detail the specifics of the declarations because AT&T later repudiated the declarations it filed and the agreement it sought to enforce.
¶5 Spierer, a senior attorney with AT&T, signed a declaration on January 8, 2004, declaring that since August 1, 2001, AT&T's relationship with its customers has been governed by the terms of a Consumer Services Agreement. The Consumer Services Agreement has been revised several times. "Indeed, the version sent to Mr. McKee was an amended [Consumer Services Agreement], effective March 1, 2002." Clerk's Papers (CP) at 691. Morlock filed a similar declaration dated October 23, 2003, in support of AT&T's motion to compel arbitration. She declared,
1. I am a Fulfillment/Response Operations Manager for AT&T Corp.
2. It is my responsibility as a Fulfillment/Response Manager to ensure that all customers receive a "fulfillment package" from AT&T as a result of an order he/she may have placed. It is a business practice of AT&T to mail this fulfillment package within 8-10 business days from the date the customer places his/her order . . . .
3. Mr. McKee became an AT&T customer in November 2002. Attached as Exhibit A to this declaration is a true and correct copy of the fulfillment package.
CP at 1114. Both Spierer and Morlock attached the same version of the Consumer Services Agreement, which became the subject of several hearings in Chelan County.
¶6 For clarity, an entire copy of the Consumer Services Agreement is included as an appendix to this opinion. ¶7 McKee opposed the motion to compel arbitration and moved to stay arbitration, claiming the agreement was substantively and procedurally unconscionable. He claimed he had no meaningful choice and the agreement was overly one-sided and harsh because it prohibited class actions, shortened the statute of limitations, prohibited punitive damages and attorney fees, required arbitration be kept secret, and required application of New York law. AT&T is incorporated in New York. McKee filed declarations from a former Washington assistant attorney general and several other experienced Washington attorneys. Owen Clarke, former Washington State assistant attorney general for 25 years, and the head of the Spokane County Consumer Protection Division for 17 years, declared that McKee's class action suit would require a skilled attorney and that without class certification the class members would be unable to retain qualified counsel. Two other experienced attorneys, Garfield Jeffers and David Thorner, declared that moderate income consumers cannot afford the hourly rates of trial lawyers and that no attorney would take a case on a contingent basis where the amount in controversy is so small and the risk so great. ¶8 On June 18, 2004, Judge Bridges heard oral argument on the motions to compel and stay arbitration. He denied the motion to compel arbitration, finding the entire dispute resolution section of the agreement substantively unconscionable because of the provisions prohibiting class actions, shortening the statute of limitations, limiting damages, requiring confidentiality, and requiring the application of New York law. Judge Bridges found the unconscionable provisions were not severable from other provisions and declared the entire dispute resolution clause unenforceable. ¶9 After Judge Bridges' oral ruling, more than a year passed before the parties presented findings of fact. It appears counsel was awaiting this court's decisions in Zuver v. Airtouch Communications, Inc., 153 Wn.2d 293, 103 P.3d 753 (2004) and Adler v. Fred Lind Manor, 153 Wn.2d 331, 103 P.3d 773 (2004). ¶10 During that year, in March 2005, approximately nine months after the learned trial judge issued his oral opinion on June 18, 2004, Spierer filed a new declaration, declaring that AT&T had revised its Consumer Services Agreement for "its millions of residential customers." CP at 126-31. He declared that he was mistaken in his 2001 declaration. He contended that AT&T had amended its agreement "in significant ways, including, for example, the removal of the two-year statute of limitations, the ability of the customer to determine whether the proceedings should be confidential, and specifically allowing consumers to obtain statutory relief--including damages and attorney's fees--through the arbitration process." ¶11 AT&T appealed, and the Court of Appeals certified the case to this court. STANDARD OF REVIEW [1-5] ¶12 Arbitrability is a question of law we review de novo. Zuver, 153 Wn.2d at 302. The burden of proof is on the party seeking to avoid arbitration. Id. (citing Green Tree Fin. Corp. v. Randolph, 531 U.S. 79, 92, 121 S. Ct. 513, 148 L. Ed. 2d 373 (2000)). When the validity of an agreement to arbitrate is challenged, courts apply ordinary state contract law. Luna v. Household Fin. Corp. III, 236 F. Supp. 2d 1166, 1173 (W.D. Wash. 2002) (quoting Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 892 (9th Cir. 2001)); see also First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944, 115 S. Ct. 1920, 131 L. Ed. 2d 985 (1995). General contract defenses such as unconscionability may invalidate arbitration agreements. Luna, 236 F. Supp. 2d at 1173 (quoting Circuit City, 279 F.3d at 892); see also Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996)). Unconscionability is also a question of law we review de novo. Nelson v. McGoldrick, 127 Wn.2d 124, 131, 896 P.2d 1258 (1995). CHOICE OF LAW [6] ¶13 We turn first to the question of which state's law should apply to determine the validity of the agreement. Section 8(f) of AT&T's Consumer Services Agreement provides that New York law governs the agreement. Both the dispute resolution section and the agreement as a whole state that if any individual part is found unenforceable, it should be severed and the rest enforced. We review choice of law questions de novo. Erwin v. Cotter Health Ctrs., 161 Wn.2d 676, 690-91, 167 P.3d 1112 (2007). ¶14 The choice of law question focuses us on very similar issues to those we considered in Dix v. ICT Group, Inc., 160 Wn.2d 826, 161 P.3d 1016 (2007), where we held that a forum selection clause selecting the state of Virginia was substantively unconscionable because it effectively denied relief under Washington's Consumer Protection Act, which evidences a strong public policy in favor of class actions for small consumer claims. [7] ¶15 We generally enforce contract choice of law provisions with certain exceptions. Erwin, 161 Wn.2d at 695-96. We disregard the contract provision and apply Washington law if, without the provision, Washington law would apply; if the chosen state's law violates a fundamental public policy of Washington; and if Washington's interest in the determination of the issue materially outweighs the chosen state's interest. Id. at 694-95 (citing O'Brien v. Shearson Hayden Stone, Inc., 90 Wn.2d 680, 685, 586 P.2d 830 (1978) and quoting RESTATEMENT (SECOND) OF CONFLICT OF LAWS $ 187 (1971)). We will enforce a choice of law provision unless all three of these conditions are met. [8, 9] ¶16 Each of these conditions is met in this case. First, if there were no choice of law provision, Washington law would be applied to this consumer contract performed in Washington. Washington applies the "most significant relationship" test from the Restatement, supra, $ 188. Mulcahy v. Farmers Ins. Co. of Wash., 152 Wn.2d 92, 100, 95 P.3d 313 (2004). Courts weigh the relative importance to the particular issue of (a) the place of contracting, (b) the place of negotiation of the contract, (c) the place of performance of the contract, (d) the location of the subject matter of the contract, and (e) the domicile, residence, or place of incorporation of the parties. Id. (citing RESTATEMENT, supra, $ 188). Here, Washington is the place of contracting, the place of negotiation (what little there was), the place of performance, the location of the subject matter, and the residence of one of the parties. New York's only tie to this litigation is that it is the state of incorporation of AT&T. We therefore conclude that, absent a choice of law clause, Washington law would apply to this dispute. [10, 11] ¶17 Second, New York law, which allows waiver of class-based relief, conflicts with our state's fundamental public policy to protect consumers through the availability of class action. See Scott v. Cingular Wireless, 160 Wn.2d 843, 854, 161 P.3d 1000 (2007); ¶18 The proper focus here, under section 187(2)(b) of the Restatement, is whether New York law permitting a class action ban is contrary to a Washington fundamental policy. This question is different than determining whether a class action ban under some circumstances is substantively unconscionable. We have held that some class action prohibitions may be conscionable. But application of New York law would permit waiver of any and all class action claims, and we have declared a strong Washington State public policy in support of the use of class action claims to pursue actions for small-dollar damage claims under the Washington State Consumer Protection Act. See Scott, 160 Wn.2d at 854. ¶19 In Dix, we explained that forum selection clauses contravening the "'strong public policy of the forum in which suit is brought'" may be invalid and we held that a forum selection clause designating Virginia as the forum was unenforceable against Washington citizens asserting small-dollar Consumer Protection Act claims. Dix, 160 Wn.2d at 836 (quoting Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S. Ct. 1907, 32 L. Ed. 2d 513 (1972)). We held that a forum selection clause was substantively unconscionable because it denied relief by selecting a forum in which consumer class actions were not available. Id. at 837. Specifically, we held that "a forum selection clause that seriously impairs the plaintiff's ability to go forward on a claim of small value by eliminating class suits in circumstances where there is no feasible alternative for seeking relief violates public policy and is unenforceable." Id. [12] ¶20 In contrast, New York courts have held that class action waivers are enforceable under New York law. Tsadilas v. Providian Nat'l Bank, 13 A.D.3d 190, 191, 786 N.Y.S.2d 478 (N.Y. App. Div. 2004); Ranieri v. Bell Atl. Mobile, 304 A.D.2d 353, 354, 759 N.Y.S.2d 448 (N.Y. App. Div. 2003). Under New York law, class-based relief would not be available in cases such as Scott and the one before us now. Therefore, the choice of New York law in this case is unconscionable under Dix because it conflicts with Washington's fundamental public policy favoring the availability of class-based relief for small consumer claims. Accordingly, we hold that Washington's strong Consumer Protection Act policy favoring class adjudication of small-dollar claims is a "fundamental policy" contemplated by Restatement, supra, $ 187(2)(b). [13] ¶21 Finally, Washington's interest in protecting large classes of its consumers materially outweighs New York's limited interest in this matter. See Erwin, 161 Wn.2d at 695. Thus, the New York choice of law provision in AT&T's Consumer Services Agreement is unenforceable and Washington law will be applied. FEDERAL COMMUNICATIONS ACT OF 1934 PREEMPTION ¶22 Next, AT&T argues that Washington law is preempted by the Federal Communications Act of 1934 (FCA) (codified as amended at 47 U.S.C. $$ 151-161, 201-231, 251-261, 301-339, 351-363). AT&T distinguishes this case from Scott because the federal act in question there was the Federal Arbitration Act (FAA), Title 9 U.S.C. Scott, 160 Wn.2d at 857-59. AT&T argues that the FCA "demonstrates a congressional intent that customers receive uniform terms and conditions of service" and that to achieve such uniformity, it is Congress's and the Federal Communications Commission's (FCC) goal to create a federal, uniform standard for determining the validity of the rates, terms, and conditions of carriers. AT&T contends that Washington's consumer protection and contract laws are impliedly preempted by the FCA because they "stand as an obstacle to the accomplishment and execution of Congress's and the FCC's purpose and objective of creating a federal, uniform standard for determining the validity of long-distance service contract rates, terms, and conditions." Br. of Appellant at 19-20. [14-17] ¶23 Under the supremacy clause of the United States Constitution article VI, clause 2, state laws are not superseded by congressional legislation unless that is the clear and manifest purpose of Congress. Hue v. Farmboy Spray Co., 127 Wn.2d 67, 78, 896 P.2d 682 (1995); Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S. Ct. 2608, 120 L. Ed. 2d 407 (1992). Preemption is a question of law we review de novo. Axess Int'l Ltd. v. Intercargo Ins. Co., 107 Wn. App. 713, 722, 30 P.3d 1 (2001) (citing Hoddevik v. Arctic Alaska Fisheries Corp., 94 Wn. App. 268, 278, 970 P.2d 828 (1999)). Conflict preemption is found where it is impossible to comply with both state and federal law or where state law "stands as an obstacle to the accomplishment of the full purposes and objectives of Congress." Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S. Ct. 615, 78 L. Ed. 2d 443 (1984). The obstruction strand of conflict preemption focuses on both the objective of the federal law and the method chosen by Congress to effectuate that objective, taking into account the law's text, application, history, and interpretation. See Int'l Paper Co. v. Ouellette, 479 U.S. 481, 494, 107 S. Ct. 805, 93 L. Ed. 2d 883 (1987) ("state law . . . is pre-empted if it interferes with the methods by which the federal statute was designed to reach this goal"); Jones v. Rath Packing Co., 430 U.S. 519, 526, 97 S. Ct. 1305, 51 L. Ed. 2d 604 (1977) (courts should consider how law is applied and interpreted in addition to plain text). Thus, the question for us is whether Congress's intent or goals would truly be frustrated if AT&T were required to comply with Washington's laws regarding the formation of consumer contracts and the strong public policy of Washington's Consumer Protection Act that consumers be able to vindicate their right to be free of unfair and deceptive practices in consumer transactions. See Ting v. AT&T, 319 F.3d 1126, 1136 (9th Cir. 2003) and cases cited therein. See also RCW 19.86.020. ¶24 AT&T urges us to follow a Seventh Circuit opinion that AT&T contends is the leading case on preemption under the FCA. Boomer v. AT&T Corp., 309 F.3d 404 (7th Cir. 2002). The Washington State attorney general, appearing as amicus, urges us not to follow Boomer. The attorney general argues the issue of whether the FCA preempts state consumer protection and contract laws was considered and correctly decided five years ago by the Ninth Circuit Court of Appeals in Ting, 319 F.3d 1126. The Ninth Circuit examined the FCA's text, application, history, and interpretation thoroughly before reaching its conclusion that the FCA, after detariffing, no longer preempts state laws in claims arising from the rates, terms, and conditions of a long distance carrier's customer contract. Id. at 1130-33, 1137-46. ¶25 Congress originally enacted the FCA in 1934, ch. 652, 48 Stat. 1064 (codified as amended at 47 U.S.C. $$ 151-161, 201-231, 251-261, 301-339, 351-363). It was passed in a monopolistic environment. Section 203(a) was intended to provide fair contracts through a tariff system. It required telecommunications carriers to file with the FCC a list of tariffs, or "schedules," showing "all charges . . . and . . . the classifications, practices, and regulations affecting such charges." 47 U.S.C. $ 203(a). Tariffs covered not only the rates but the terms and conditions of customer contracts. The act prohibited any "classification, regulations, or practice affecting such charges, except as specified" in a carrier's filed tariffs. Id. $ 203(c)(3). In the filed-tariff environment, consumers were, in theory, protected from unjust, unreasonable, or discriminatory rates, terms, and conditions by the FCC's prior determination that the carrier's filed rate was "just" and "reasonable" and not unreasonably or unduly discriminatory. Once a tariff was approved by the FCC, it then carried the force of law and became binding on both the consumer and the carrier. Brown v. MCI Worldcom Network Servs., Inc., 277 F.3d 1166, 1170 (9th Cir. 2002) (quoting Lowden v. Simonds-Shields Lonsdale Grain Co., 306 U.S. 516, 520, 59 S. Ct. 612, 83 L. Ed. 953 (1939)). Under this regime, courts frequently held that state law contract claims were barred. See, e.g., Am. Tel. & Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 228, 118 S. Ct. 1956, 141 L. Ed. 2d 222 (1998); In re NOS Commc'ns, 495 F.3d 1052 (9th Cir. 2007). ¶26 Over time, the monopolistic model fell way to deregulation and free market pressures. Under the old regime, AT&T had achieved a near monopoly in the telecommunications market, and there were many companies eager to enter the telecommunications market. Starting in the early 1980's, the FCC tried to prohibit tariff-filing by nondominant carriers (i.e., those other than AT&T) on the ground that market forces would guarantee reasonable rates without collusive pricing. In re Policy & Rules Concerning Rates for Competitive Common Carrier Servs., 99 F.C.C.2d 1020, 1028-29 (1985). Finally, in 1996, Congress fundamentally changed the communications act's scheme by adopting a national policy of opening all telecommunications markets to competition and providing a deregulatory, procompetition framework. H.R. Conf. Rep. No. 104-458, at 113 (1996), reprinted in 1996 U.S.C.C.A.N. 124. As the Ninth Circuit explained: Finally armed with the requisite congressional authorization, the FCC promptly issued a Notice of Proposed Rulemaking on March 25, 1996, to "forbear from applying" the tariffing requirements of $ 203 of the 1934 Act. Notice of Proposed Rulemaking, 11 F.C.C.R. 7,141 (1996). In the Notice, the Commission tentatively concluded that tariffs were no longer necessary because market forces were sufficient to protect consumers from unjust and unreasonable rates, terms, and conditions. Id. at ¶¶ 30, 31 (concluding that removing filing requirement will promote competition and prevent collusive pricing). Following a comment period, the FCC issued an order of mandatory detariffing on October 29, 1996, see Second Report and Order, 11 F.C.C.R. 20,730 (1996), thus confirming that "enforcement of the tariffing provision is neither necessary to ensure just and reasonable, non-discriminatory rates, nor necessary for the protection of consumers." MCI WorldCom, Inc., v. FCC, 341 U.S. App. D.C. 132, 209 F.3d 760, 763 (D.C. Cir. 2000) (citing Second Report and Order, 11 F.C.C.R. 20,730, at ¶ 21). Ting, 319 F.3d at 1132. ¶27 When Congress authorized the FCC to eliminate the filing requirement, it permitted the tariff filing mechanism to be replaced by a market-based mechanism in the form of individual negotiated contracts between carriers and their customers. Id. Unlike tariff filing, however, this market-based mechanism depends in part on state law. Id. at 1133. The market-based method of achieving the act's goals of reasonableness, fairness, and nondiscrimination in carrier contracts does not require a single, federal standard but rather depends in part on state law for the protection of consumers in the deregulated and competitive marketplace. Id. ¶28 The Boomer court, relied upon by AT&T, failed to do a historical analysis. Boomer, 309 F.3d at 417-23. The Boomer court based its conclusion upon a textual analysis of sections 201(b) and 202(a) of the 1996 Telecommunications Act. Id. Sections 201(b) and 202(a) of the act, which survived detariffing, require that charges and practices be "just and reasonable" and prohibit "unjust or unreasonable discrimination" in charges and practices. But as pointed out by the Ninth Circuit, "save for Boomer, no court has ever referred to $ 201 or $ 202 in declaring a carrier's tariff immune from state-law challenge. That role had always been reserved for $ 203 and the filed rate doctrine." Ting, 319 F.3d at 1138 (citing Cent. Office, 524 U.S. at 223). ¶29 The FCC no longer enforces section 203's filing requirements. We agree with the Ninth Circuit that reliance on sections 201 and 202 for federal preemption is untenable. Ting, 319 F.3d at 1139. Congress unquestionably intended that consumers receive fair and reasonable rates. 47 U.S.C. $ 202(a) makes it unlawful for a carrier to "make any unjust or unreasonable discrimination" for "like communication service" or "to make or give any undue or unreasonable preference or advantage." But Congress also unquestionably intended that telecommunications providers compete in a free market place and that consumers would have the protection of state consumer protection laws. Dow and the United States greatly overstate the degree of uniformity and centralization that characterizes FIFRA [Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. $$ 136-136y]. In fact, the statute authorizes a relatively decentralized scheme that preserves a broad role for state regulation . . . . A literal reading of $ 136v(b) is fully consistent with the concurrent authority of the Federal and State Governments in this sphere. Id. at 450-51 (citations omitted).» ¶30 Senator Slade Gorton, then a senator from the state of Washington, succinctly summarized the goals of the FCA when he noted that the 1996 Telecommunications Act (permitting the FCC to cease enforcing section 203's tariffing requirement) would allow "[s]tates to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications service, and safeguard the rights of consumers, which are, of course, the precise goals of this Federal statute itself." 141 CONG. REC. S8206-02, S8212 (daily ed. June 13, 1995) (statement of Sen. Gorton). ¶31 Setting aside its preemption argument, even AT&T concedes that state law now governs the formation of consumer long distance contracts. Br. of Appellant at 22-23. This is so because even the Boomer court recognized that, following detariffing, there appears to be some role for state law. Boomer, 309 F.3d at 423 (acknowledging that state law may determine whether a contract has been formed). But we find no persuasive support for Boomer's argument that the role of state contract law is somehow limited to laws governing offer and acceptance. In Marcus v. AT&T Corp., 138 F.3d 46, 54 (2d Cir. 1998), the court held that the communications act does not manifest a clear congressional intent to preempt state law prohibiting deceptive business practices, false advertising, or common law fraud. In interpreting the 1996 Telecommunications Act, the FCC has repeatedly referred to the role of state law and has not done so in limiting terms. See, e.g., In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section 254(g) of the Commc'ns Act of 1934, 11 F.C.C.R. 20,730, 20,751 (1996) (Second Report and Order) (after detariffing, consumers will also "be able to pursue remedies under state consumer protection and contract laws" and carriers will be treated like all other businesses in unregulated markets); In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section 254(g) of the Commc'ns Act of 1934, 12 F.C.C.R. 15,014, 15,057 (1996) (Order on Reconsideration) (consumers will have remedies under state contract and consumer protection law regarding the "legal relationship" between carrier and consumer). ¶32 To summarize, in 1996, Congress made a paradigm shift from a monopolistic, tariffed-rate system to a competitive market. Congress's goal of ensuring that telecommunications carriers provide consumers with reasonable, fair, and nondiscriminatory rates, terms, and conditions in a competitive market is furthered by providing consumers the protections of state contract and consumer protection laws. AT&T seems aghast that it may have to comply with the laws of 50 different states, but that is precisely what every other company that competes in a free, competitive, and open market must do. There is nothing in the 1996 Telecommunications Act that declares preemption or dictates that all contracts must be identical or uniform. 47 U.S.C. $$ 201, 202. Nothing prevents AT&T from creating new consumer services agreements with fair and reasonable terms that are consistent with the state laws in each state or all states in which it operates. Congress contemplated concurrent authority between federal and state authorities. State and private remedies aid rather than hinder the goal of preventing unjust or unreasonable discrimination. FAA PREEMPTION [18-21] ¶33 AT&T also argues preemption under the FAA. As a preliminary matter, we reject AT&T's argument that unconscionability should be decided by the arbitrator under the FAA and Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449, 126 S. Ct. 1204, 163 L. Ed. 2d 1038 (2006). In Buckeye, the plaintiff argued that the illegal interest rate provided for in the contract voided the entire contract, including the arbitration clause. Id. at 443-44. There was no argument that the arbitration clause itself was unconscionable or illegal. The court held that when a party claims the contract as a whole is illegal, but does not specifically challenge the arbitration clause, the arbitrator should decide whether the contract is illegal. Id. at 449. The court did not change the rule that when the validity of the arbitration agreement itself is at issue, the courts must first determine whether there was a valid agreement to arbitrate. Id. at 445. That rule applies here because the challenges McKee raises with regard to the AT&T Consumer Services Agreement relate only and specifically to the dispute resolution and arbitration section. See Preston v. Ferrer, ___ U.S. ___, 128 S. Ct. 978, 984, 169 L. Ed. 2d 917 (2008) (court compelled arbitration under Buckeye because there was no discrete challenge to the arbitration clause in the proceedings below); Vasquez-Lopez v. Beneficial Or., Inc., 210 Or. App. 553, 565, 152 P.3d 940 (2007). ¶34 As in Scott, this challenge is not preempted by section 2 of the FAA. Scott, 160 Wn.2d at 858; 9 U.S.C. $ 2. The FAA requires that we place arbitration agreements on the same footing as other contracts. See, e.g., Doctor's Assocs., 517 U.S. at 687. It does not require us to allow unconscionable restrictions on arbitration that are essentially exculpatory clauses in disguise. The FAA does not require us to uphold a class action waiver merely because it is embedded in an arbitration agreement. See Scott, 160 Wn.2d at 858. Like any other contract, an arbitration agreement may be substantively unconscionable when it is used as a tool of oppression to prevent vindication of small but widespread claims. See, e.g., id. at 858-59; Luna, 236 F. Supp. 2d at 1179 (citing Mendez v. Palm Harbor Homes, Inc., 111 Wn. App. 446, 465, 45 P.3d 594 (2002)). ¶35 As we said in Scott, class action waiver has nothing to do with a valid agreement to arbitrate. Class actions are often arbitrated. See Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444, 453, 123 S. Ct. 2402, 156 L. Ed. 2d 414 (2003). Class actions actually promote the prime objective of an agreement to arbitrate, which is "'streamlined proceedings and expeditious results.'" Preston, 128 S. Ct. at 986 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 633, 105 S. Ct. 3346, 87 L. Ed. 2d 444 (1985)). Similarly, arbitrations can (and often should) be conducted openly and without secrecy, apply appropriate statutes of limitations, award damages (both compensatory and punitive), and award attorney fees. Limiting consumers' rights to open hearings, shortening statutes of limitations, limiting damages, and awarding attorney fees have absolutely nothing to do with resolving a dispute by arbitration. Courts will not be so easily deceived by the unilateral stripping away of protections and remedies merely because provisions are disguised as arbitration clauses. The FAA does not require enforcement of unconscionable contract provisions. We adhere to our decision in Scott and hold that the FAA does not preempt application of Washington consumer protection law. SUBSTANTIVE UNCONSCIONABILITY [22-24] ¶36 Although states may not refuse to enforce arbitration agreements based upon state laws that apply only to such agreements, "generally applicable contract defenses, such as fraud, duress, or unconscionability" may be applied. Doctor's Assocs., 517 U.S. at 687. Whether an agreement is unconscionable is a question of law for the courts. Nelson, 127 Wn.2d at 131. Agreements may be either substantively or procedurally unconscionable. Zuver, 153 Wn.2d at 303. Substantive unconscionability involves those cases where a clause or term in the contract is one-sided or overly harsh. Id. Substantive unconscionability alone is sufficient to support a finding of unconscionability. Adler, 153 Wn.2d at 346-47. Here, the agreement to arbitrate is included in a section of the agreement entitled "Dispute Resolution." CP at 718-19. That section, and the rest of the agreement, contains several clauses limiting the nature of the relief available in arbitration. A. Class Action Waiver [25] ¶37 This issue was largely, but not entirely, decided by Scott. Scott, 160 Wn.2d at 847. In Scott, we held that a class action waiver in an arbitration agreement was substantively unconscionable. Id. In so holding, we relied on several crucial facts. First, the individual claims at issue were very small (between $ 1 and around $ 45 per month), but the plaintiffs alleged that in the aggregate, Cingular had overcharged the public very large sums of money. Id. at 847-48. We found that without class action suits, the public's ability to act as "'private attorneys general,'" as intended in the Consumer Protection Act, was eviscerated. Id. at 854. We therefore concluded the class action waiver was unconscionably in violation of public policy. Id. ¶38 We also found the agreement substantively unconscionable because it effectively, if not explicitly, exculpated Cingular for potentially widespread misconduct. Id. at 855. We found that when wrongs are small but widespread, class actions are often the only effective way to address them. Id. We rejected Cingular's argument that relief was practically available because it promised to pay the costs of individual arbitration and because attorney fees could be awarded to the prevailing party. Id. at 856. We cited the evidence that no attorney would be willing to undertake individual arbitration to recover the trivial amounts of money at stake in an individual claim. Id. We also noted that small claims court was not an effective remedy because the amounts at issue were too small to be worth the time and energy, let alone the nominal filing fee. Id. We were concerned that without class actions, many consumers might not even know they had a claim. Id. at 855. ¶39 As in Scott, the contract now before us is a contract for consumer services, and the individual claims here are extremely small, under $ 2 per month. Without access to class-wide relief, competent counsel would not be available to redress many meritorious claims. See CP at 566-69. The agreement allows for small claims court actions, but even the availability of small claims court or low-cost arbitration does not make it practicable for an individual to pursue such small amounts. See Scott, 160 Wn.2d at 855-56. Indeed, this agreement is less favorable to consumers than the one we struck down in Scott. Cingular's agreement at issue in Scott provided that Cingular would pay the attorney fees for a prevailing consumer. Id. at 856. Here, not only does AT&T not pay the consumer's attorney fees, the agreement prohibits the arbitrator from awarding them unless specifically provided for in a statute. Because the class action waiver in this case is not meaningfully different from the one we held substantively unconscionable in Scott, we hold that the class action waiver in the AT&T agreement before us is unconscionable. B. Confidentiality [26, 27] ¶40 A confidentiality clause in a contract of adhesion is a one-sided provision designed to disadvantage claimants and may even help conceal consumer fraud. Confidentiality unreasonably favors repeat players such as AT&T. See Ting, 319 F.3d at 1151-52; Luna, 236 F. Supp. 2d at 1180; Zuver, 153 Wn.2d at 312-15. Secrecy conceals any patterns of illegal or abusive practices. It hampers plaintiffs in learning about potentially meritorious claims and serves no purpose other than to tilt the scales in favor of AT&T. See Zuver, 153 Wn.2d at 313-14. It ensures that AT&T will "'accumulate[ ] a wealth of knowledge'" about arbitrators, legal issues, and tactics. Id. at 312-13 (quoting Ting, 319 F.3d at 1152). Meanwhile, consumers are prevented from sharing discovery, fact patterns, or even work product, such as briefing, forcing them to reinvent the wheel in each and every claim, no matter how similar. ¶41 Washington has a strong policy that justice should be administered openly and publicly. See Dreiling v. Jain, 151 Wn.2d 900, 908, 93 P.3d 861 (2004) (discussing sealed court records). Under our constitution, "[j]ustice in all cases shall be administered openly." CONST. art. I, $ 10. Secrecy breeds mistrust and, potentially, misuse of power. Dreiling, 151 Wn.2d at 908. Whether in regard to improper utility surcharges or unreasonably dangerous products, consumer adhesion contracts that require secrecy violate this important public policy. We hold that the confidentiality provision before us is substantively unconscionable. C. Statute of Limitations [28] ¶42 Generally, parties can shorten the applicable statute of limitations by contract unless a shorter time frame is unreasonable or prohibited by statute or public policy. Adler, 153 Wn.2d at 356. But such a limitation is harsh and one-sided when imposed on a consumer in a contract of adhesion for a basic consumer service such as long distance telephone service. It is for these consumer service agreements that Washington's Consumer Protection Act is designed to provide protection. RCW 19.86.920 (purpose of act is to "protect the public and foster fair and honest competition"); see also Scott, 160 Wn.2d at 853. The Washington Consumer Protection Act provides a four year statute of limitations, but AT&T's agreement cuts that period in half. RCW 19.86.120; CP at 719. The four year statute of limitations permits adequate time for consumers to vindicate rights violated by unfair business practices. The act would be meaningless if consumer contracts of adhesion routinely stripped consumers of their remedies under the Consumer Protection Act; "consumers would have far less ability to vindicate" their rights under the act. Scott, 160 Wn.2d at 854. We hold AT&T's limitation on actions is substantively unconscionable as against public policy as to Consumer Protection Act claims. See id. at 851-53. D. Limit on Attorney Fees [29] ¶43 The AT&T Consumer Services Agreement is completely lopsided on the issue of attorney fees. AT&T has not hesitated to give itself the advantage of collecting its attorney fees as one of its remedies. Section 2(e) of the agreement entitled "SUSPENDING AND CANCELLING THE SERVICES" provides in part, "Subject to Section 7, you must reimburse us for any reasonable costs we incur, including attorneys' fees, to collect charges owed to us." CP at 718. Section 3, entitled "INDEMNIFICATION" provides in part, "YOU AGREE TO REIMBURSE US FOR ALL COSTS AND EXPENSES RELATED TO THE DEFENSE OF ANY SUCH CLAIMS, INCLUDING ATTORNEYS' FEES." Id. However, section 7(a) provides that any claim by the customer must be submitted to arbitration and limits the remedies available, "THE ARBITRATOR MAY NOT AWARD DAMAGES THAT ARE NOT EXPRESSLY AUTHORIZED BY THIS AGREEMENT AND MAY NOT AWARD PUNITIVE DAMAGES OR ATTORNEYS' FEES UNLESS SUCH DAMAGES ARE EXPRESSLY AUTHORIZED BY A STATUTE." Id. ¶44 Section 7 contravenes the policy of this state. Washington follows the American rule, and each party is expected to pay the party's own attorney fees unless otherwise provided by statute or contract. Cosmopolitan Eng'g Group, Inc. v. Ondeo Degremont, Inc., 159 Wn.2d 292, 303, 149 P.3d 666 (2006). When one party to a contract seeks to impose a unilateral attorney fee provision by contract, Washington's policy, by statute, is to convert the unilateral provision into a reciprocal contractual provision that applies equally to all parties to the contract. RCW 4.84.330. Further Washington's Consumer Protection Act provides for attorney fees for consumers who successfully challenge unfair acts and practices. RCW 19.86.090. AT&T's provision limiting attorney fees is unconscionable under Scott. We found that even if attorney fees might be awarded to a prevailing consumer, the risk was still too great to make relief meaningfully available. Scott, 160 Wn.2d at 856. If an arbitrator awarded even one cent less than the amount the consumer requested (which arbitrators often do in attempting to find a compromise), the attorney fees would not be available. Id. Here, the agreement purports to prohibit the arbitrator from awarding attorney fees unless expressly provided for in a statute. CP at 718. We hold the limit on attorney fees is also substantively unconscionable. E. Limit on Punitive Damages [30] ¶45 As described above, section 7 prohibits an arbitrator from awarding punitive damages unless expressly authorized by statute. The trial judge concluded that this provision was substantively unconscionable. However, Washington is one of only a few states that does not provide generally for punitive damages for particularly egregious conduct. Dailey v. N. Coast Life Ins. Co., 129 Wn.2d 572, 575, 919 P.2d 589 (1996); see also, e.g., Allowance of Punitive Damages in Products Liability Case, 13 A.L.R.4TH 52 (1982). Washington does provide a few limited examples of exemplary damages. The relevant example is the Consumer Protection Act, which provides "treble" damages upon appropriate findings. RCW 19.86.090. We say limited because in the instant case, the damages sought are $ 2 per month; under Washington's Consumer Protection Act, a prevailing consumer might be awarded up to $ 6 per month. The agreement permits punitive damages "expressly authorized by a statute." CP at 718. Because Washington provides for limited examples of exemplary damages and each example is specifically authorized by statute, we do not read AT&T's Consumer Services Agreement to limit the availability of punitive damages in Washington State. We hold the limitation on punitive damages is not unconscionable. PROCEDURAL UNCONSCIONABILITY ¶46 The trial judge found AT&T's Consumer Services Agreement both substantively and procedurally unconscionable. McKee was not provided with a copy of any agreement at the time he signed up for AT&T services. Even when a consumer contracts for a service electronically, the consumer has an opportunity to review the contract and is given the choice to "agree" before the contract is formed. See, e.g., Koresko v. RealNetworks, Inc., 291 F. Supp. 2d 1157, 1163 (E.D. Cal. 2003) (describing electronic "clickwrap" agreements). AT&T apparently mailed the terms and conditions to McKee 10 days to two weeks after he subscribed for service. AT&T retained the right to unilaterally change the contract by posting the change on its web site or by mailing the notice of the change. A consumer was deemed to have agreed to the changes by continuing to use AT&T service whether the consumer had actual notice of the change or not. SEVERABILITY [31] ¶47 The trial judge concluded these unconscionable provisions permeate the entire arbitration agreement and thus cannot be severed. Each provision discussed above magnifies the exculpatory effect of the arbitration agreement. These unconscionable provisions operate in concert to eliminate any realistic possibility of relief for consumers with small claims such as McKee's. We affirm Judge Bridges's conclusion that severance is not possible because the four unconscionable terms pervade the dispute resolution section of the agreement. AT&T would have us strike the unconscionable provisions from the dispute resolution section and enforce the rest of the dispute resolution section. However, when unconscionable provisions so permeate an agreement, we strike the entire section or contract. See Zuver, 153 Wn.2d at 320 (quoting Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1180 (9th Cir. 2003); Alexander v. Anthony Int'l, LP, 341 F.3d 256, 271 (3d Cir. 2003)). Here, we are faced with four different unconscionable terms and we find that they taint the entire dispute resolution section, such that severance would essentially require us to rewrite the dispute resolution agreement. See Ingle, 328 F.3d at 1180. ¶48 Permitting severability as requested by AT&T in the face of a contract that is permeated with unconscionability only encourages those who draft contracts of adhesion to overreach. If the worst that can happen is the offensive provisions are severed and the balance enforced, the dominant party has nothing to lose by inserting one-sided, unconscionable provisions. [32] ¶49 Although we find that the entire dispute resolution section must be stricken because the unconscionable terms are inextricable without rewriting the agreement, we find that this effect does not extend to the rest of the Consumer Services Agreement. Section 8 of the Consumer Services Agreement provides for severability. "e. Separability. If any part of this Agreement is found invalid, the rest of the Agreement will remain valid and enforceable." CP at 719. We give effect to severability clauses if we can easily excise the unconscionable provision without essentially rewriting the contract. See Zuver, 153 Wn.2d at 320 (quoting Ingle, 328 F.3d at 1180). We find that having excised the dispute resolution provision as unconscionable, the balance of the agreement stands on its own. We hold that the balance of the agreement is enforceable subject to this opinion. CONCLUSION ¶50 Courts, not arbitrators, decide the validity of arbitration agreements. Buckeye, 546 U.S. at 445. Applying choice of law principles, Washington law applies to this contract dispute. Washington consumer protection law and Washington law relating to the formation of contracts are not preempted by either the FCA or the FAA. The AT&T Consumer Services Agreement before us is a contract of adhesion. AT&T's Consumer Services Agreement is substantively unconscionable and therefore unenforceable to the extent that it purports to waive the right to class actions, require confidentiality, shorten the Washington Consumer Protection Act statute of limitations, and limit availability of attorney fees. We emphasize that these provisions have nothing to do with arbitration. Arbitrators supervise class actions, conduct open hearings, apply appropriate statutes of limitations, and award compensatory and punitive damages, as well as attorney fees, where appropriate. Courts will not be easily deceived by attempts to unilaterally strip away consumer protections and remedies by efforts to cloak the waiver of important rights under an arbitration clause. The dispute resolution section is severable from the balance of the contract. We affirm the trial court in all respects unless otherwise noted and remand for further proceedings consistent with this opinion. ¶51 ALEXANDER, C.J.; C. JOHNSON, SANDERS, OWENS, FAIRHURST, and J.M. JOHNSON, JJ.; and ELLINGTON, J. PRO TEM., concur. ¶52 MADSEN, J. concurs in result only. ¶53 See Addendum in original.0 ¶54 See Addendum in original.0 ¶55 See Addendum in original.0 ¶56 See Addendum in original.0 ¶57 See Addendum in original.0 0