Arizona COA Holds Financially Burdensome Arbitration Agreement is Unenforceable

Most businesses and individuals consider arbitration a cost-effective dispute resolution method.  In general, an agreement to arbitrate will be upheld by the various courts across the nation.  In a precedent-setting decision, however, the Arizona Court of Appeals has ruled that financially burdensome arbitration agreements are “unconscionable” and therefore unenforceable.  The decision in Clark v. Renaissance West, LLC, No. 1 CA-CV 12-0692, (Ariz: Court of Appeals, 1st Div., July 31, 2013) would allow an individual who voluntarily agreed to arbitrate a dispute to retain an attorney and file a lawsuit in certain circumstances.

The case arose after a former nursing home resident filed a neglect lawsuit against the Springdale West skilled nursing facility.  The alleged victim, 88-year-old John Clark, signed an agreement to arbitrate any and all disputes with the company three days after he was admitted.  The nursing facility responded to Clark’s lawsuit by filing a motion to compel arbitration.  Clark argued that the costs and fees associated with arbitration were exceedingly high when compared with his fixed income.  The trial court denied the nursing home’s motion and the facility appealed.  On appeal, a unanimous court held the parties’ agreement to arbitrate was “substantively unconscionable because the cost to arbitrate was prohibitively high.”

What do you think of the Arizona court’s decision?  We would love to hear your thoughts.