In Simpson v. MSA of Myrtle Beach, the Court considered two issues: (1) the proper forum to determine whether an arbitration clause is unconscionable, and (2) whether the clause was unconscionable. At base this was a dispute between a car dealer and a consumer. On the back page of the purchase contract was an arbitration clause. The consumer alleged in was unconscionable and unenforceable, and the dealer argued that such a decision was for the arbitrator and not a court. The Supreme Court disagreed with the dealer and held that an unconscionabilty argument goes to the existence of a contract and thus it was for the court to determine in the first instance whether a binding contract existed--that is, whether it was unconscionable.
Next, the Court turned to the clause itself. The Court held that contracts between a consumer and automobile retailer with must be reviewed with "considerable skepticism." Under this approach, the Court observed that vehicles are critical in modern society, the consumer did not possess the business judgment necessary to make her aware of the implications of the arbitration agreement, and that the consumer did not have a lawyer present to provide any assistance in the matter. The Court found it important that the clause was inconspicuous and buried on the back of the form: the arbitration clause in its entirety was written in the standard small print, and embedded in paragraph ten (10) of sixteen (16) total paragraphs included on the page. Another factor considered by the court was lack of mutuality. The arbitration clause provided that the dealer could bring judicial proceedings even if there were pending consumer claims in arbitration.
In sum, the Court found the clause unconscionable and thus unenforceable.