in bargaining power, that there was no opportunity for negotiation, or that (the) services could not be obtained elsewhere.'" Jones v. Dressel, 623 P.2d 370, 374 (Colo. 1981) (citation omitted). While the Court can infer that First Trust and Fiserv enjoy superior bargaining power to Plaintiffs and that Plaintiffs had no opportunity to modify the terms of the contract, Plaintiffs have not proffered evidence or otherwise demonstrated that any of the other Davis factors are present.
Colorado courts have expressed a preference for upholding forum selection clauses. See Vessels Oil & Gas Co. v. Coastal Refining and Marketing, Inc., 764 P.2d 391, 393 (Colo.Ct.App. 1988); ABC Mobile Systems, Inc. v. Harvey, 701 P.2d 137, 139-40 (Colo.Ct.App. 1985). The language of the venue provision at issue here — arbitration "shall take place only in Denver, Colorado" and not "in any other forum or location" — demonstrates that it is mandatory, not permissive. Vanderbeek v. Vernon Corp., 25 P.3d 1242, 1248 (Colo.Ct. App. 2000), affirmed, 50 P.3d 866 (Colo. 2002). Although Denver is an inconvenient venue for Plaintiffs, it arguably is a reasonable location for resolution of the parties' dispute because First Trust is a Colorado corporation with its principal place of business in Denver.*fn9 The Court concludes that neither the contract at issue nor its arbitration provision satisfies the criteria for unconscionability under Colorado law.
"Under California law, a contract is unenforceable if it is both procedurally and substantively unconscionable." Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 893 (9th Cir. 2002), cert. denied, 535 U.S. 1112, 122 S.Ct. 2329, 153 L.Ed.2d 160 (2002). The procedural element focuses on oppression or surprise due to unequal bargaining power, while the substantive element focuses on whether the terms are unduly harsh or one-sided. Id.; Little v. Auto Stiegler, Inc., 29 Cal.4th 1064, 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979 (2003). The elements of procedural unconscionability and substantive unconscionability "operate on a sliding scale such that the more significant one is, the less significant the other need be." Comb v. PayPal, Inc., 218 F. Supp.2d 1165, 1172 (N.D.Cal. 2002). "A contract or clause is procedurally unconscionable if it is a contract of adhesion." Id.Accord Little, 29 Cal.4th at 1071, 130 Cal.Rptr.2d 892, 63 P.3d 979. The California Supreme Court has defined a contract of adhesion as a "`standardized contract, which, imposed and drafted by the party of superior bargaining strength, relegates to the subscribing party only the opportunity to adhere to the contract or reject it.'" Armendariz v. Found. Health Psychcare Serv., Inc., 24 Cal.4th 83, 113, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000) (citation omitted). The contract at issue meets this definition. First Trust and Fiserv point out that the services they provide may be obtained elsewhere without submission to an arbitration agreement that includes a Denver venue provision. However, this Court has held that under California law the availability of alternative sources for the subject services is insufficient to defeat a claim of procedural unconscionability. Comb, 218 F. Supp.2d at 1172-73. The Court concludes that the contract at issue satisfies the criteria for procedural unconscionability in California.
Even if the First Trust IRA application is procedurally unconscionable, however, it nonetheless may be enforceable if its substantive terms are reasonable. Id. at 1173. As noted above, Plaintiffs contend that the arbitration provision is substantively unconscionable because its forum selection clause specifies venue in Denver. Plaintiffs rely on Bolter v. Superior Court, 87 Cal.App.4th 900, 104 Cal.Rptr.2d 888 (Cal. Ct.App. 2001), for the proposition that arbitration agreements that require weaker parties to resolve their disputes in states geographically distant from their domiciles are substantively unconscionable. In Bolter, the plaintiffs appealed the trial court's order granting the defendant's motion to compel arbitration in Utah pursuant to provisions of the parties' franchise agreement. The agreement at issue in Bolter required that all disputes regarding the agreement be submitted for arbitration before the Salt Lake City, Utah office of the American Arbitration Association. Id. at 908, 104 Cal.Rptr.2d 888. The California Court of Appeal concluded that the franchise agreement was a contract of adhesion and that its "place and manner" terms were unduly oppressive to the plaintiffs. Id. at 907-09, 104 Cal.Rptr.2d 888. The circumstances of the parties were relevant to the court's analysis: the plaintiffs were small "mom-and-pop" franchisees located in California, and the party seeking to compel arbitration was an international carpet cleaning corporation that recently had relocated its headquarters from California to Utah. Id. at 909-10, 104 Cal. Rpltr.2d 888. Because it found that only the "place and manner" terms of the contract were substantively unconscionable and that those terms were severable from the rest of the contract, the court issued a writ of mandate directing the trial court to vacate its judgment and enter a new and different order striking the forum selection provision; the court did not invalidate the entire agreement to arbitrate. Id. at 911, 104 Cal.Rptr.2d 888.
The reasoning of Bolter applies here. As in Bolter, the arbitration agreement at issue includes a venue provision that requires Plaintiffs to resolve their dispute before the American Arbitration Association in a state geographically distant from their California residence. And as in Bolter, Plaintiffs are the weaker, less sophisticated parties who contend that the costs of proceeding in the specified venue are preclusive.*fn10 In Comb, this Court found that inclusion in PayPal's arbitration agreement of a provision that limited venue to PayPal's backyard was designed to shield PayPal from liability instead of providing a neutral forum in which to arbitrate disputes. 218 F. Supp.2d at 1177. As with the defendant in Comb, First Trust does business throughout the United States but requires individual customers from across the country to travel to one locale to arbitrate their claims. Accordingly, the Court concludes that the venue provision is substantively unconscionable.
"Under California law, courts have discretion to sever an unconscionable provision or refuse to enforce the contract in its entirety." Circuit City, 279 F.3d at 895 (citing Cal. Civ. Code § 1670.5(a)). "If the illegality is collateral to the main purpose of the contract, and the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate." Id. (citing Armendariz, 24 Cal.4th at 124, 99 Cal.Rptr.2d 745, 6 P.3d 669). If "the offending provisions can be excised from the contract . . . then the remainder of the contract can be enforced." Mercuro v. Superior Court, 96 Cal.App.4th 167, 184, 116 Cal.Rptr.2d 671 (2002). Plaintiffs note correctly that there is no express severability language in the First Trust IRA application. However, there is no indication that the contract at issue in Bolter included such language, and yet the California Court of Appeal concluded that the terms of a similar venue provision were "clearly severable" from the rest of the arbitration agreement. 87 Cal.App.4th. at 911, 104 Cal.Rptr.2d 888. As in Bolter, the venue provision stands alone and does not permeate the contract. See, in contrast, Armendariz, Mercuro, Circuit City, and Ferguson v. Countrywide Credit Industries, Inc., 298 F.3d 778 (9th Cir. 2002).*fn11 Even if the offending provisions are not severable, they can be excised from the contract by means of limitation. Accordingly, the Court finds and concludes that the following terms of the arbitration agreement are unconscionable and thus unenforceable: the clause "that such arbitration proceedings and hearings shall take place only in Denver, Colorado;" and the clause "in any other forum or location"*fn12 in the sentence "The Account owner expressly waives any right he/she may have to institute or conduct litigation or arbitration in any other forum or location, or before any other body."
Defendants emphasize that the same arbitration provision of the First Trust IRA application executed by Dr. Wilmot has been deemed valid and enforceable in unpublished decisions issued by three other federal courts. See Saunders v. First Trust Corp., No. CV-98-4304 CAS (MANx) (C.D. Cal. filed Sept. 4, 1998) (tentative minute order), Ex. 3 to First Trust's Motion to Compel Arbitration; O'Brien v. Hinkle, No. 1:99CV179 (N.D. W. Va. filed Feb. 11, 2000) (order accepting magistrate's recommendation), Ex. 5 to First Trust's Motion to Compel Arbitration; Smith v. CNA Financial Corp., No. 7:01CV00653 (W.D.Va. filed March 14, 2002) (order), Ex. 6 to First Trust's Motion to Compel Arbitration. However, none of those courts considered whether the venue provision at issue here is unconscionable under California law.*fn13
For the reasons discussed above, the Court concludes that the arbitration provision of the First Trust IRA application does not satisfy the criteria for unconscionability under Colorado law but that its venue provision satisfies the criteria for unconscionability under California law. Because the unconscionable provision is severable from the rest of the arbitration agreement or at least subject to limitation, all other terms of the arbitration agreement are valid and enforceable. Accordingly, the motion brought by First Trust and Fiserv will be granted, but the requirement that arbitration be conducted in Denver will be stricken. Arbitration of Plaintiffs' claims against First Trust and Fiserv shall proceed at an office of the American Arbitration Association located within California.
Good cause therefore appearing, IT IS HEREBY ORDERED that the motions to compel arbitration brought by Defendants Cambridge, AIC, and NFS are GRANTED.*fn14 Having considered the terms of the First Trust IRA application as well as the totality of the circumstances, the Court concludes that the Denver venue provision is substantively unconscionable under California law and thus unenforceable. Therefore, the motion to compel arbitration brought by First Trust and Fiserv is GRANTED on the condition that arbitration of Plaintiffs' claims against First Trust and Fiserv occur within California. The proceedings in this matter are stayed pending completion of the various arbitration processes.