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Arbitration: Enforceability of Agreement to Arbitrate Disputes That Requires Plaintiff to Bear All Costs & Fees/Substantive Unconscionability

Posted by Ted A. Schmidt | Aug 17, 2021 | 0 Comments

Arbitration: Enforceability of Agreement to Arbitrate Disputes That Requires Plaintiff to Bear All Costs & Fees/Substantive Unconscionability

Rizzio v. Surpass Senior Living LLC, No. CV-20-0058-PR (August 17, 2021) (J. Montgomery) https://www.azcourts.gov/Portals/0/OpinionFiles/Supreme/2021/CV200058PR.pdf

CONTRACTUAL AGREEMENT TO ARBITRATE DISPUTES MAY BE FOUND SUBSTANTIVELY UNCONSCIONABLE IF IT REQUIRES PLAINTIFF TO BEAR ALL COSTS AND FEES OF DEFENDANT IF PLAINTIFF SHOWS FINANCIAL INABILITY TO PAY/COURT MAY CONSIDER PLAINTIFF'S FEE CONTRACT WITH HER ATTORNEY WHERE ATTORNEY AGREES TO ADVANCE ALL COSTS IN DETERMINING SUBSTANTIVE UNCONSCIONABILITY.

Plaintiff's daughter placed plaintiff in defendant Surpass Senior Living nursing home where plaintiff was attacked by another patient.  Plaintiff sued the home, attacker and others. Surpass moved to dismiss based upon an agreement to arbitrate disputes that plaintiff's daughter signed on plaintiff's behalf pursuant to a power of attorney.  The trial court denied the motion to dismiss finding the arbitration agreement to be procedurally unconscionable as well as substantively unconscionable. The finding of substantive unconscionability was based upon the agreement's requirement that  plaintiff to pay all costs and fees of the defendant which effectively made it unfeasible for plaintiff to vindicate her claim.  The Arizona Court of Appeals reversed the trial court finding plaintiff's fee contract with her attorney wherein her attorney agreed to advance all costs, defeated the claim that plaintiff would be denied the opportunity to seek redress through arbitration.  The Arizona Supreme Court reversed in part and remanded the matter to the trial court and affirmed in part and vacated in part the opinion of the court of appeals.

The supreme court found it appropriate to consider all the surrounding circumstances of a plaintiff's ability to pay arbitration fees and costs including her attorney fee contract requiring her attorney to advance costs.  Such an attorney fee contract provision is not dispositive of the issue but it is to be considered. Here the plaintiff failed to meet her burden to present adequate evidence to the trial court regarding her claimed inability to pay costs and fees and therefore the agreement to arbitrate cannot be found to be substantively unconscionable. The trial court is directed to enter an order compelling arbitration.

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".

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