## Facts

- Geographic Expeditions, Inc. (GeoEx) organized a Mount Kilimanjaro hiking expedition attended by Jason Lhotka.
- Before the trip, Jason Lhotka and his mother signed a GeoEx “limitation of liability and release form” presented as a non-negotiable condition of participation.
- The form included: (1) mandatory mediation and, if unresolved, binding arbitration in San Francisco under AAA auspices; (2) equal splitting of mediator costs; (3) a damages cap limiting recovery “under any and all circumstances” to the land and air cost of the trip; and (4) a one-way indemnity/attorneys’ fees obligation requiring the client to indemnify GeoEx if the client brought claims the form purported to release.
- The form also contained a broad liability waiver releasing GeoEx from liability “to the maximum extent permitted by law.”
- Jason Lhotka died during the expedition from an altitude-related illness.
- His survivors filed a wrongful death and related tort action against GeoEx in California state court.
- GeoEx moved to compel arbitration and stay the court action; the trial court denied the motion, finding the arbitration provisions unconscionable.

## Issues

1. Whether the dispute-resolution provisions (mediation/arbitration and related terms) were procedurally and substantively unconscionable under California law and therefore unenforceable.
2. If any terms were unconscionable, whether the court should sever the offending terms and enforce the remainder of the arbitration agreement.

## Decision

- The Court of Appeal affirmed the order denying GeoEx’s motion to compel arbitration.
- The court held the arbitration agreement was procedurally unconscionable because it was imposed on consumers on a take-it-or-leave-it basis with no meaningful opportunity to negotiate.
- The court held the agreement was substantively unconscionable because its remedial and cost-allocation terms were overly harsh and effectively one-sided.
- The court further held the trial court acted within its discretion in refusing severance because the unfairness permeated the dispute-resolution scheme and severance would require judicial rewriting rather than limited excision.

## Legal Principles

- Unconscionability under California law requires both procedural and substantive elements, applied on a sliding scale: greater substantive unfairness requires less procedural showing, and vice versa.
- Adhesive, non-negotiable consumer contracts can supply procedural unconscionability, particularly where the transaction involves unequal bargaining power and standardized terms.
- Arbitration provisions may be substantively unconscionable when they impose severe limits on available remedies (including drastic damages caps) and allocate dispute-resolution costs in a manner likely to deter claims.
- One-way indemnity or fee-shifting provisions that expose only the consumer to the other side’s attorneys’ fees can contribute to substantive unconscionability by chilling the pursuit of claims.
- A court may decline to sever unconscionable terms when multiple unfair provisions are interdependent or pervasive, and severance would require reconstructing the parties’ agreement.

## Conclusion

The court refused to compel arbitration because the dispute-resolution provisions, imposed through an adhesive consumer form, combined a refund-level damages cap, cost-splitting requirements, and a one-sided indemnity clause that collectively rendered the arbitration agreement unconscionable; the trial court permissibly declined severance and left the claims to proceed in court.


Lhotka v. Geographic Expeditions, Inc., 181 Cal. App. 4th 816 (Cal. Ct. App. 2010)