Arizona Court Strikes Down Arbitration Clause as Too Expensive for Plaintiff

By F. Paul Bland   On Twitter @PblandBland

This is a classic good news/bad news type of case for plaintiffs.  The good news is that a court struck down as unconscionable an arbitration clause that imposed enormous fees on an individual before the individual could go to arbitration.  The bad news is that the case shows what a heavy evidentiary burden is placed on plaintiffs.

In Clark v. Renaissance West, a man sued a nursing home for medical malpractice, alleging that neglect had caused him to develop a severe pressure ulcer that caused enormous problems.  The nursing home (of course) tried to force the case into arbitration.  An Arizona state Court of Appeals held that the man had proven that the arbitration clause would impose prohibitively expensive costs of arbitration on him before he could pursue his claim, and it struck down the clause as unconscionable.

The court held that a plaintiff alleging that an arbitration clause would be prohibitively expensive has the burden of showing specific facts proving that claim, with reasonable certainty.  So in this case, the plaintiff had an expert who testified about the average hourly rates of arbitrators in the Phoenix area (hundreds of dollars an hour), and who testified that the complexity of the plaintiffs' claims would require him to put forward testimony from enough expert and fact  witnesses that an arbitration hearing on his claims would likely take five days.  Because the arbitration clause required that any case be heard by a three arbitrator panel (a typical sign of a clause where a corporation is trying to make arbitration too expensive for the individual), the upshot is that the plaintiff — a retiree with a fixed income — would have had to pay $22,800 to arbitrate his claims, and he couldn't afford it.

This case is instructive for plaintiffs' lawyers.  While most sophisticated corporations are willing to pay nearly all the cost of arbitration (mostly because they want to ban class actions, and they don't want to lose their shield against class action liability because they've gouged individuals with prohibitive arbitration costs), other types of corporations — and nursing homes are by far the worst actors in the marketplace right now on this point — DO like to stick individuals with enormous fees to arbitrate claims.

The key, though, is that plaintiffs' lawyers have to really put some effort into proving how expensive arbitration is.  Every year, when I sit and read through stacks of cases involving unconscionability challenges to arbitration clauses when I'm working on updating the National Consumer Law Center's manual Consumer Arbitration Agreements, I see a ton of cases where courts rejected challenges to arbitration clauses because the plaintiffs hadn't proven their case adequately.  This case shows that plaintiffs CAN win these challenges, but that they have to really shoulder the heavy evidentiary burden that most courts will put on them.

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