Morris v. Redwood Empire Bancorp – Case Brief Summary (California)

In Morris v. Redwood Empire Bancorp (2005) 128 Cal.App.4th 1305, the plaintiff obtained from the defendant a merchant account to process customers' credit cards. (Morris, supra, 128 Cal.App.4th at p. 1311.) The merchant agreement charged various fees, including a $150 termination fee. (Ibid.) The plaintiff later canceled the merchant agreement and paid the termination fee. (Ibid.) He filed an action against the defendant, alleging the termination fee was and void as unreasonable. (Ibid.) The defendants successfully demurred and the Court of Appeal affirmed. (Id. at p. 1325.)

Our Fourth District colleagues found the plaintiff failed to allege procedural unconscionability. (Morris, supra, 128 Cal.App.4th at pp. 1320-1321.) The appellate court concluded the plaintiff had alleged an adhesion contract. (Id. at p. 1319.) The appellate court further held: "Our recognition of the merchant agreement as an adhesion contract, however, heralds the beginning, not the end, of inquiry into its enforceability. . . . . . . Although adhesions contracts often are procedurally oppressive, this is not always the case. Oppression refers not only to an absence of power to negotiate the terms of a contract, but also to the absence of reasonable market alternatives." (Id. at pp. 1319-1320.)

Our Fourth District colleagues found:

"The plaintiff failed to allege he could not have obtained merchant credit card services from another source on different terms. Moreover, unlike situations where the weaker party is under immediate pressure not to seek out alternative sources, the plaintiff was under no such compulsion in attempting to start his business." (Id. at p. 1320.)