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Stonerise Healthcare, LLC v. Oats

Stonerise Healthcare, LLC v. Oats

Case No. 
19-0215
Type of Proceeding: 
Appeal from the Circuit Court of Mineral County (Judge Nelson)
Issues: 

Did the trial court err by finding that the arbitration agreement was unconscionable and, therefore, unenforceable?

Background: 

Respondent is Susan K. Oats, whose mother was hospitalized in November, 2015, and then transported to Petitioner’s nursing home.  Respondent was presented with an admission packet containing 97 pages.  Respondent alleges that she was in a state of “chaos” at the time because of worry for her mother’s health and lengthy work hours.  The packet included what Respondent described as a hand-crafted arbitration agreement.  The agreement had the following features: (1) a “loser pays” provision giving the arbitrator power to assess fees and costs, including attorney fees, against the losing party; (2) a confidentiality provision that allegedly gave Petitioner--as a “repeat player” in arbitration circles--access to “a wealth of knowledge and precedent from previous arbitration proceedings”; (3) language selecting NAF as the arbitrator even though it was notoriously anti-consumer; and (4) language that effectively shortened the statute of limitations.

Petitioner moved to dismiss, citing the arbitration language in the admission agreement.  Respondent opposed the motion and argued that the agreement was both procedurally and substantively unconscionable. The trial court agreed.  Petitioner appeals from the trial court’s order denying Petitioner’s motion to dismiss. 

Positions of the Parties: 

Petitioner:

Petitioner makes two basic arguments.

First, Petitioner argues that the trial court’s unconscionability finding was wrong.  Petitioner points out that the admission agreement is, in fact, voluntary.  Furthermore, the specific provisions cited by Respondent are not substantively unconscionable.  Instead, they are facially neutral and impose “equal obligations on both parties.”  Petitioner also failed to make a showing of procedural unconscionability.  Respondent was well educated and had worked for many years in management.  There was also a substantial delay, i.e., 18 hours or more, between the admission and the time Respondent signed the admission agreement.

Second, Petitioner acknowledges that NAF was unavailable as an arbitration forum because it had entered into a consent decree preventing it from hearing consumer cases.  Nevertheless, the choice of arbitrator was not an essential term of the agreement.  Instead, it was only an “ancillary logistical concern.”  Therefore, the arbitration agreement remained fully enforceable.

Respondent:

According to Respondent, she was in a “compromised” bargaining position.  The admission agreement was presented on a take-it-or-leave-it basis.  Respondent did not know there was arbitration language in the agreement and Petitioner did not explain that language. Furthermore, the signature line on the page with the arbitration agreement was marked by Petitioner with an “x,” dispelling any suggestion it was voluntary.  Furthermore, the specific provisions cited by Respondent were intended (1) to intimidate Respondent and dissuade her from pursuing any recovery, and (2) to give Petitioner a clear strategic advantage in any arbitration proceedings that might take place.  Thus, the trial court was correct in finding both procedural and substantive unconscionability.

With respect to NAF, Respondent was not arguing this feature in and of itself made the arbitration agreement unenforceable.  Instead, it was Respondent’s position that the choice of an anti-consumer arbitrator was yet another fact indicating that the agreement was substantively unconscionable.

 

Probable Impact: 

 

This is a Rule 19 case, meaning that the Supreme Court does not anticipate writing a new syllabus point addressing any of the arbitration issues raised herein.  However, this case presents a fairly common fact pattern seen in many kinds of consumer transactions across the State of West Virginia.  How the Supreme Court addresses unconscionability under these facts will be a good indicator of how it will deal with unconscionability issues as they arise in future cases.

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