2016 Ohio 7480
Ohio Ct. App.2016Background
- Conte contracted with Blossom Homes for a $175,658 residential construction/remodeling project; disputes arose over deviations from plans, inspections, and structural defects, and Conte withheld $9,750 from final payment.
- Blossom filed a mechanic’s lien and Conte sued Blossom and subcontractors for breach of contract, negligence, breach of warranty, OCSPA violations, fraud, quiet title, and slander of title.
- Blossom moved to stay the litigation and compel arbitration under Article XX of the parties’ written Residential Purchase Agreement, which incorporated AAA Construction Industry Arbitration Rules and included: a one-year contractual arbitration filing limit, a provision that each party bear its own costs and an equal share of arbitrator/admin fees (with a caveat that attorneys’ fees may be awarded under Article XV), and confidentiality and damages-limiting language.
- Conte opposed, arguing the arbitration clause was procedurally and substantively unconscionable (font/notice, no explanation of arbitration, waiver of jury) and against public policy; he also challenged the one-year filing bar and the loser-pays effect.
- Trial court denied Blossom’s stay motion, finding the clause unconscionable and contrary to public policy; the court of appeals reversed in part, enforcing arbitration but excising the loser-pays provision as unconscionable and against public policy, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause | Clause was procedurally and substantively unconscionable; inadequate notice and waiver of jury | Clause is mutual, incorporated AAA rules, and is enforceable under Ohio arbitration policy | Arbitration agreement enforceable (de novo review) after excision of unconscionable term |
| Procedural unconscionability (notice/meeting of minds) | Conte rushed signing, didn’t understand arbitration, font/format not conspicuous | Conte initialed all pages, had opportunity to negotiate/seek counsel; no evidence of coercion | No procedural unconscionability found; Conte had meaningful choice and cannot avoid by claiming he didn’t read |
| Substantive unconscionability – loser-pays / fee allocation | Provision chills statutory claims (OCSPA, HCSSA) and undermines statutory fee-shifting; discourages consumers from filing | Language is optional and mutual; not an absolute bar to fee awards | Loser-pays provision (as drafted) unconscionable and against public policy; court excises that provision |
| One-year contractual limitation to file arbitration | One-year bar may be unreasonable for latent construction defects and could nullify claims | Limitation is mutual, clear (claims barred if not submitted within one year of accrual) and parties can contractually shorten limitations | Court leaves reasonableness/any conflict with law for arbitrator to decide; did not invalidate the one-year bar on the record |
Key Cases Cited
- Williams v. Aetna Fin. Co., 83 Ohio St.3d 464 (1998) (Ohio public policy favors enforcement of arbitration provisions)
- Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.3d 352 (2008) (arbitration is contractual; claims presumptively arbitrable unless contract revocation grounds exist)
- ABM Farms, Inc. v. Woods, 81 Ohio St.3d 498 (1998) (failure to read a contract generally does not excuse assent)
- Kraly v. Vannewkirk, 69 Ohio St.3d 627 (1994) (contractual shortening of statutory limitation is valid if unambiguous, reasonable, and not against public policy)
- Devito v. Autos Direct Online, Inc., 37 N.E.3d 194 (8th Dist. 2015) (loser-pays/arbitration fee provisions can be unconscionable and chill statutory claims)
- Hedeen v. Autos Direct Online, Inc., 19 N.E.3d 957 (8th Dist. 2014) (similar analysis rejecting arbitration provisions that effectively nullify consumer statutory remedies)