Legal advice on Arbitration clause (Arizona Law)
An arbitration clause is a part of a contract which requires that any dispute between the parties be handled in arbitration, rather than trial courts. The goal of an arbitration clause is to prevent class actions from forming. However, these clauses are not always enforceable and many plaintiffs have found ways around them. The Courts in Arizona are not strict in the application of Arbitration despite the freedom that comes with making and entering into a voluntary contract like you did with Elle Interiors LLC.
An unconscionable contract is a contract that is unenforceable in a court of law. Arbitration agreements may be found unconscionable on “such grounds as exist at law or in equity” to revoke a contract.
There are two types of contractual unconscionability:
- procedural
- Substantive.
Procedural unconscionability addresses the fairness of the bargaining process, which “is concerned with ‘unfair surprise’, fine print clauses, mistakes or ignorance of important facts”. Substantive unconscionability, on the other hand, determines the fairness of the terms of the contract itself. For example, a contract may be considered substantively unconscionable if its terms favor one party too heavily over another. In this case, the Arbitration Clause favors the interior design Company more than if favors you.
An arbitration agreement may be substantively unconscionable if the fees and costs to arbitrate are so excessive as to “deny a potential litigant the opportunity to vindicate his or her rights.” In such cases, it is up to the plaintiff to prove to the court that the arbitration would be prohibitively expensive. In your case, you have mentioned that the fees and the total cost of arbitration is estimated to cost more than the amount you are asking for from the Elle Company. This qualifies to be categorized as ‘Prohibitively expensive’ since it will defeat the purpose of the Arbitration proceedings.
First, you have to present evidence concerning the cost to arbitrate. The evidence provided must be based on specific facts showing with reasonable certainty the likely costs of arbitration. Second, you must show that based on your specific condition, (The reason why you want the money back is because the service provider asked for extra pay which you couldn’t afford therefore the arbitration costs will be unfair) you are unable to pay the likely costs of arbitration.
One case that exemplifies this is Clark v. Renaissance West in Arizona. The plaintiff sued the nursing home for medical malpractice, alleging that it was due to their negligence that he formed a pressure ulcer which required surgery and long term care to remedy. Clark had signed a contract with the nursing home that included an arbitration clause but he argued that the clause was unenforceable and took the case to trial. The trial court ruled that the arbitration clause was, indeed unconscionable, and the appellate court agreed after Renaissance West appealed the lower court’s decision. Clark brought in an expert who testified that, based on the complexity of Clark’s case, they could be in arbitration for at least five days (assuming an 8-hour day). Taking that into consideration, arbitration alone would have cost Clark about $22,800. Since Clark is retired and living on a fixed income, such an exorbitant amount is clearly beyond his means.
The appellate court’s decision is a mixed blessing for plaintiffs like you who are trying to avoid unfair arbitration provisions. On the one hand, the plaintiff won and the arbitration clause has been rejected. On the other hand, this case has proven the lengths to which plaintiffs must go in order to prove that the arbitration clause is unconscionable.
You already have enough evidence to prove that the Arbitration Clause is unconscionable. You may proceed to small claims court and make your claim.
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