We learn here that the validity of a plaintiff’s contract with a defendant can depend on the nature of the fee agreement she later signs with her lawyer.
Plaintiff’s daughter put her in Defendant’s nursing home. Plaintiff was injured at the home and sued it. Defendant moved to compel arbitration, there being an arbitration agreement in the contracts Daughter (who had mom’s power of attorney) had signed. Plaintiff objected, arguing that the agreement was unconscionable. The facts were:
- The agreement required Plaintiff to pay Defendant’s costs and attorney’s fees regardless of the outcome of a dispute;
- The contract advised the patient to obtain counsel before signing it;
- Signing it was not a requirement for admission to the nursing home;
- Daughter testified that she met with Defendant’s representative for 10-15 minutes before signing and the arbitration provision was not pointed out to her; the representative testified that her standard practice was to send out the documents beforehand, point out the arbitration agreement, and meet with people for over one hour;
- the provision regarding costs and fees was expressly severable from the remainder of the contract;
- Plaintiff’s fee agreement with her lawyer was of the no-recovery-no-fee (or cost) variety.
After an evidentiary hearing the trial court denied the motion, deciding that the agreement was procedurally and substantively unconscionable and that it violated Plaintiff’s reasonable expectations. Defendant appealed.
The Court of Appeals reverses.
First, it says that the “superior court’s findings here do not establish procedural unconscionability.” This was merely a “standardized adhesion contract.” Such contracts do not have to be explained, and it was Daughter’s fault for not reading it, and anyway the part she didn’t read told her to get a lawyer. “This record does not support a finding of procedural unconscionability and we therefore reverse that finding.” (It is not clear here whether the court means “finding” or “conclusion” or whether it knows the difference. In any event, is the court saying that the conclusion does not follow from the findings or that the findings are unsupported by the evidence? The former is an odd call, the latter a risky one.)
The court then agrees that the provision regarding costs and fees is unconscionable, “oppressive and may not be enforced.” Then it rules that the provision should be severed. (Actually, it doesn’t; it simply says that Plaintiff’s arguments on severability are wrong. But later it suggests that this part of the opinion had indeed “stricken” or “severed” the provision.)
Is the agreement unconscionable without the fee provision? It can be if the costs of pursuing arbitration are prohibitive. But Plaintiff didn’t have to pay anything unless she won. So the court decides that costs are not prohibitive. For it this is the crux of the opinion; its opinion’s first sentence tells us that the case concerns “an agreement to arbitrate . . . when counsel for the party seeking to avoid arbitration has agreed to advance all costs.” And so the validity of the contract Plaintiff signed in April 2017 depends on the nature of her agreement with her lawyer a year or so later. (And so her lawyer’s act in having her enter into it caused or contributed to her failure to overturn the arbitration agreement. Will he report that to his carrier?)
Finally, the court decides that the trial court erred in finding a violation of reasonable expectations. Defendant, the court tells us, “had [no] reason to believe” that Plaintiff wouldn’t have signed the contract had she known about the arbitration cost provision and, anyway, the court severed it. (A provision that makes her pay whether she wins or loses in a contract she doesn’t have to sign in order to get her mom admitted — and there’s no reason to believe that she wouldn’t have signed it had she known? The court has already told us that the provision is “oppressive”; has that no bearing on what a defendant has reason to believe?)
Costs on appeal to Defendant; remanded for proceedings consistent.
Your homework: calculate the chances that Defendant will change even one comma of that oppressive, unconscionable, and unenforceable — but delightfully in terrorem and conveniently severable if the rubes catch on — provision.
(Opinion: Rizzio v. Surpass Senior Living)