In Meadows v. Cebridge Acquisition, LLC, the United States Court of Appeals for the Fourth Circuit had to decide whether an arbitration agreement included in an adhesive contract concluded with the consumer is unconscionable and, thus, unenforceable. The Fourth Circuit concluded that under the Federal Arbitration Act (“FAA”), the court’s inquiry was limited to the terms of the arbitration agreement, and, under the applicable state law, the arbitration agreement was not unconscionable. 

Background

The case arose from three separate lawsuits filed by three individual plaintiffs (Richard Chaty, Benjamin Meadows, and Roxie Gooch) against their internet providers—Cebridge Acquisition, LLC, Cequel III Communications I, LLC, Cequel III Communications II, LLC, and Altice USA, Inc.—operating under the brand Suddenlink (“Suddenlink”).

The plaintiffs became Suddenlink’s customers in 2011, 2013, and 2017, respectively. Each individual has been a party to Suddenlink’s Residential Service Agreement (RSA), which has been amended multiple times. For the case, the amendments enacted in 2016 (“2017 RSA”) and 2021 (“2021 RSA”) are the most relevant.

The 2017 RSA included an arbitration clause referring disputes to arbitration in accordance with the Commercial Arbitration Rules and Mediation Procedures of the American Arbitration Association (“AAA Commercial Rules”). It further provided that rules for fee and cost allocation, dependent on the outcome of the arbitration in comparison to Suddenlink’s pre-arbitration offer, as well as the amount in dispute:

• If the customer prevailed with an award higher than Suddenlink’s offer, Suddenlink would pay either USD 5,000 or the amount awarded, whichever was higher, and pay reasonable attorney’s fees and expenses.
• If the final award was lower than the offer, the AAA Commercial Rules would govern payment of fees and costs.
• However, if the case involved more than USD 7,500 in damages, the AAA Commercial Rules would govern the payment of fees and costs regardless of the outcome.

The arbitration agreement further prohibited the award of punitive damages, relief in excess or contrary to the terms of the RSA, and class actions. 

It also gave Suddenlink the right to pursue claims related to debt collection in court, whereas the customers had no such option. Furthermore, the customer had to initiate arbitration within one year under penalty of waiver. The agreement did not include such a limitation for Suddenlink’s claims. 

The 2017 RSA also included a general clause allowing Suddenlink to modify the agreement, but the customers opt out of these changes by terminating the services immediately. 

The 2021 RSA modified the arbitration agreement by:

• Adding a new obligation to negotiate the dispute for 60 days before submitting the matter to arbitration.
• Modifying the applicable arbitration rules to the AAA’s Consumer Arbitration Rules (“AAA Consumer Rules”), with modifications. 
• Modifying the provisions on allocation of costs: 
  • If the customer initiated the arbitration, the customer would be responsible for the specified portion of fees in accordance with the arbitration rules applicable to claims exceeding USD 10,000; 
  • If Suddenlink initiated the arbitration, Suddenlink would pay all AAA filing, administrative, and arbitrator fees. 
• Explicitly prohibiting consolidated, class, and representative arbitrations, as well as prohibiting the arbitrator from awarding “non-individualized relief that would affect other account holders.”
• Empowering arbitrators to decide on all issues, except arbitrability, the scope of the arbitration agreement, and its enforceability.
• Stating that the arbitration was to take place before a sole arbitrator, and authorizing an appeal to a three-arbitrator panel administered by AAA under its Optional Appellate Arbitration Rules in cases in which the amount in dispute exceeded USD 7,500 or an injunctive relief was sought.
• Reserving Suddenlink’s right to amend the arbitration agreement, but excluding the applicability of these amendments to claims already brought in the appropriate proceedings. In case of amendments, the customer had to be notified and had the right to cancel the agreement if they disagreed with the revision. 

In April 2022, each plaintiff filed a lawsuit against Suddenlink in West Virginia state court, alleging that Suddenlink failed to provide safe, adequate, and reliable services in breach of the 2021 RSA and West Virginia state law. Each plaintiff sought damages for the alleged negligence, unjust enrichment, and breach of contract. They also sought a declaratory judgment that the arbitration agreement was unenforceable, void for lack of consideration, or unconscionable. 

In response, Suddenlink successfully removed each case to the United States District Court for the Southern District of West Virginia, based on diversity jurisdiction, and moved to stay the proceedings and compel arbitration in accordance with the 2021 RSA arbitration agreement. 

In response to the motion to compel arbitration, each plaintiff alleged that an even newer version of the RSA, from July 2022, applied.  

District Court Proceedings

On January 25, 2023, the United States District Court for the Southern District of West Virginia issued a memorandum opinion and order in Gooch v. Cebridge Acquisition, LLC, denying the motion to compel arbitration [1]. On the same day, the court issued orders denying the motion to compel arbitration in Chatty v. Cebridge Acquisition, LLC and Meadows v. Cebridge Acquisition, LLC “for the reasons more fully set forth” in Gooch.

The district court reasoned in Gooch that:

• To compel arbitration under the FAA, four elements must be proven: (1) existence of dispute between parties, (2) a written agreement to arbitrate purportedly covering the dispute; (3) relationship of the transaction to interstate or foreign commerce; and (4) the failure, neglect or refusal to arbitrate the dispute. 
• In this case, the only dispute element was the existence of the written arbitration agreement, as Gooch disputed entering into an arbitration agreement with Suddenlink or, alternatively, its enforceability. 
• Suddenlink argued that the 2021 RSA arbitration agreement was relevant to the case, while Gooch claimed it was the 2022 version. Neither of the parties was correct, as the 2017 RSA was operative, and the later unilateral modifications of the terms were ineffective. 
• West Virginia law governed the construction of the arbitration agreement. Under this law, a contract requires an offer and acceptance supported by consideration. The 2017 RSA and the arbitration agreement therein met these requirements, as Gooch entered into the entire agreement upon signing up for services.  
• In the context of arbitration agreements, the consideration for an arbitration agreement is an irrevocable promise that the parties will arbitrate their dispute, which cannot be changed unilaterally by one party. The RSA arbitration agreement met these requirements because the general modification clause included in the RSA was not part of the arbitration agreement under the principle of separability of arbitration agreements. 
• The Plaintiff did not assent to the later versions of the RSA, including the 2021 and 2022 versions. This is because Suddenlink did not provide reasonable notice of modifications to the arbitration agreement, as would be required under the West Virginia precedent:
  • The prompts customers received in emails, on billing statements, or during service visits did not specifically indicate that changes had been made to the 2017 RSA arbitration agreement. They were worded as a reminder that the RSA generally applies.  
  • The customers had to opt out immediately to avoid being bound by the changes, which would require them to check Suddenlink’s website constantly. 
• The 2017 RSA arbitration agreement was unconscionable. 
• First, it was procedurally unconscionable because of:
  • The difference in the bargaining power between Gooch and Suddenlink, The adhesive nature of the RSA without the option of opting out of arbitration, The arbitration agreement’s excessively complex terms included not only a reference to AAA Commercial Rules but various modifications to them, including the modification of the fee payments and the exclusion of punitive damages. 
  • There was no real opportunity for the customer to read and understand the terms of the contract—customers were provided with the contract on a small, mobile screen, while it was more than twenty-two pages long and did not include a copy of the AAA Commercial Rules.
• Second, it was substantively unconscionable as:
  • The arbitration agreement lacked mutuality, as Suddenlink had the right to pursue its claims for debt collection in courts rather than in arbitration. Furthermore, it lacked mutuality as Suddenlink was not bound by the one-year time limit for initiating claims applicable to the customers under the 2017 RSA. Additionally, excluding punitive damages was unconscionable under the West Virginia precedents.
  • However, excluding class arbitration was not a reason to find the arbitration agreement substantively unconscionable.
• The unconscionable provisions of the 2017 RSA could not have been cured by the severability clause included in the contract, as the offending provisions, particularly those undermining the mutuality of the agreement, were the essence of the arbitration agreement. 

Suddenlink appealed in each of the three cases. 

Fourth Circuit Proceedings

The United States Court of Appeals for the Fourth Circuit consolidated all three appeals [2], and, on March 27, 2025, reversed and remanded the case to the district court with instructions to compel arbitration [3].

The Fourth Circuit reasoned that:

• The district court erred in concluding that the arbitration agreement in the 2017 RSA was controlling, as all parties agreed that the 2021 RSA, including its arbitration agreement, applied to the claims. Under the applicable West Virginia contract law, contracts may be superseded by a subsequent contract. As such, the 2021 RSA superseded the 2017 RSA. At the same time, the 2022 amendments to the RSA introduced in July 2022 could not apply to the dispute as they postdated the dispute’s commencement in April 2022. As such, the 2021 RSA was controlling.
• Simultaneously, there was sufficient consideration for the arbitration agreement introduced by the 2021 RSA. This is because, in case of a mutual agreement to arbitrate, the agreement itself is adequate consideration. The fact that Suddenlink retained the right to modify the contract unilaterally did not render the consideration illusory, as the customers could opt out from the changes by cancelling their RSA. 
• The court had to focus on the terms of the arbitration agreement when assessing its enforceability and not on other terms of the RSA. This is because the arbitration agreement is severable from the underlying contract. Only provisions related to the arbitration clause could be subject to the court’s assessment. 
• The exclusions of punitive damages and the one-year “contractual statute of limitations” were not part of the arbitration clause in the 2017 RSA and would apply to disputes in any forum, not just arbitration. Therefore, the court could not take these provisions into account in assessing whether the arbitration clause is enforceable. 
• Under the applicable West Virginia law, an arbitration clause must be both procedurally and substantively grossly imbalanced or one-sided for a finding of its unconscionability. 
• Procedural unconscionability concerns the unfairness of the bargaining process caused by a party’s age, illiteracy, or lack of sophistication. Other inadequacies relevant to procedural unconscionability are unduly complex or hidden contract terms, the adhesive nature of the contract, or a lack of reasonable opportunity to understand its terms. 
• In this case, the general literacy levels in West Virginia or the alleged “monopoly power” over Suddenlink’s services were not sufficient to prove procedural unconscionability. Similarly, the contract’s adhesive nature did not create a presumption of unconscionability, nor did the fact that a customer could not opt out of the arbitration agreement to secure services from Suddenlink. The 2021 RSA was not unduly complex, and the reference to AAA Consumer Rules did not hide the arbitration provisions. The customers also had a reasonable opportunity to understand the terms of the agreement, even if reading them on a mobile device was tedious.
• As for the substantive unconscionability, the agreement would have to be one-sided and overly harsh to the disadvantaged party. Here, the pre-arbitration notice requirement was not unreasonable, as it applied equally to both parties. Similarly, the provision allowing the appeal of the award to a three-arbitrator panel was reasonable, as both parties had the right to initiate this procedure. At the same time, class action waivers are enforceable under the FAA and West Virginia precedents. As such, there were no grounds to find the arbitration agreement unconscionable. 

In an opinion concurring in part and concurring in the judgment, Judge Wynn noted that the unilateral right to change the arbitration agreement would have affected the formation of the contract if a different law had been applied to contract formation. However, as West Virginia law allowed the consideration supporting the contract as a whole to support the arbitration agreement included in this contract, the agreement was valid. 

Takeaways

The Fourth Circuit’s decision in Meadows v. Cebridge Acquisition, LLC confirms that, under the FAA, courts should focus on the terms of the arbitration agreement when considering whether to compel arbitration. Courts are not to assess the fairness or reasonableness of the entire agreement, particularly terms that do not apply only to arbitration. 

Even though the FAA governs arbitration issues in cases involving interstate and foreign commerce, business entities operating across multiple jurisdictions should align their contracts with the requirements of the state laws governing the formation of arbitration agreements. For instance, what constitutes adequate notice or valid consideration can differ significantly between jurisdictions. 

Moreover, although the threshold for proving unconscionability is generally high, business entities should ensure that their arbitration agreements comply with federal standards and align with the specific requirements and public policies of each state where they operate, especially in cases involving consumers. Tailoring arbitration clauses appropriately may mitigate the risk of enforcement challenges.

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[1] Gooch v. Cebridge Acquisition, LLC, No. 2:22-cv-00184 (S.D.W. Va. Jan. 25, 2023).

[2] Meadows v. Cebridge Acquisition, LLC, Nos. 23-1142 (L), 23-1145, 23-1146 (4th Cir. Oct. 6, 2023) (order consolidating appeals).

[3] Meadows v. Cebridge Acquisition, LLC, Nos. 23-1142 (L), 23-1145, 23-1146 (4th Cir. Mar. 27, 2025).