Clark v. Renaissance West, LLC
232 Ariz. 510
| Ariz. Ct. App. | 2013Background
- John H. Clark, an 88‑year‑old resident of a Renaissance West skilled nursing facility, signed a mandatory arbitration agreement three days after admission.
- After discharge Clark sued for medical negligence and abuse/neglect arising from a severe pressure ulcer.
- Defendants moved to compel arbitration; at an evidentiary hearing Clark presented an expert estimating arbitrator fees of about $22,800 (three arbitrators, ~5 hearing days at prevailing hourly rates).
- Clark testified he lived on a fixed income with no savings and could not afford the arbitration fees.
- The arbitration agreement required parties to split arbitrator fees equally and did not incorporate rules (e.g., AAA) that provide fee waiver or reduction for hardship.
- The trial court found the agreement substantively unconscionable because the cost to arbitrate effectively precluded Clark from vindicating his rights; the court denied the motion to compel arbitration. The appellate court affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration agreement is substantively unconscionable due to prohibitive cost | Arbitration fees (~$22,800) would be prohibitive given Clark’s fixed, asset‑less income, denying him ability to vindicate rights | Expert’s cost estimate speculative; Clark could afford fees (Defendants’ income estimate) | Yes. Court upheld trial court: evidence supported that fees would effectively bar Clark from vindicating claims, making the agreement substantively unconscionable |
| Burden to prove prohibitive cost | Clark: presented expert estimate and personal financial testimony showing inability to pay | Defendants: attacked expert’s certainty/qualification and urged deference to their income estimate | Clark met burden: specific, fact‑based estimate plus individualized showing of inability to pay; court deferred to trial fact findings |
| Relevance of fee‑waiver/reduction provisions or arbitration rules | Clark: agreement lacks waiver/reduction or incorporation of rules that allow hardship relief | Defendants: argued uncertainty and procedural features lessen unconscionability | Agreement contained no hardship waiver/AAA rules; absence supports unconscionability holding |
| Sufficiency of expert testimony on arbitration cost | Clark: expert testimony and billing exhibits provided reasonable certainty of likely fees | Defendants: expert was speculative and not experienced in medical‑malpractice arbitration | Court treated challenges as affecting weight, not admissibility, and found testimony sufficiently reliable |
Key Cases Cited
- Maxwell v. Fidelity Financial Services, 184 Ariz. 82 (explains procedural vs. substantive unconscionability)
- Harrington v. Pulte Home Corp., 211 Ariz. 241 (arbitration fees may render agreement substantively unconscionable; plaintiff bears burden to prove prohibitively expensive)
- Green Tree Financial Corp.‑Ala. v. Randolph, 531 U.S. 79 (excessive arbitration costs can preclude vindication of rights; courts must assess case‑by‑case)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (arbitration appropriate only if prospective litigant may effectively vindicate rights)
- Faber v. Menard, Inc., 367 F.3d 1048 (party avoiding arbitration must present specific evidence of likely arbitrator fees and financial ability to pay)
- Phillips v. Associates Home Equity Services, Inc., 179 F. Supp. 2d 840 (party must make reasonable, good‑faith effort to estimate arbitration costs)