2018 Ohio 3087
Ohio Ct. App.2018Background
- Jessica and Kayvon Khaledi contracted with Nickris Properties (Premier Construction) on March 1, 2016 for major home renovations and a garage; contract estimated at $97,416 and required 25% down.
- Contract contained a broad arbitration clause: disputes to be settled by the American Arbitration Association, administrative costs mutually shared.
- Khaledis sued on June 1, 2017 asserting breach of contract, negligence, fraud/misrepresentation, HCSSA and CSPA claims; defendants moved on July 28, 2017 under R.C. 2711.02 to stay proceedings pending arbitration.
- Defendants filed an R.C. 1345.092 cure offer and expressly stated they would move to stay for arbitration; they answered the complaint while reserving arbitration rights.
- Trial court granted the stay on September 18, 2017; Khaledis appealed arguing waiver, ambiguity (lack of essential terms), and unconscionability of the arbitration clause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Waiver of right to arbitrate | Khaledi: defendants submitted to court jurisdiction (cure offer, answer) and thus waived arbitration | Defendants: timely moved to stay and expressly preserved arbitration rights in answer; cure offer does not waive arbitration | No waiver — defendants did not act inconsistently with arbitration right; heavy burden to prove waiver not met |
| Ambiguity / meeting of the minds | Khaledi: clause lacks essential terms (rules, costs, number of arbitrators, binding effect), so no meeting of minds | Defendants: term "arbitration" is clear and binding by default; clause need not list every procedural detail | Clause enforceable despite lack of enumerated terms; no requirement to include all details in clause |
| Binding effect / strict construction | Khaledi: ambiguous clause should be construed against drafter as non-binding arbitration, making stay improper | Defendants: arbitration is presumed binding; R.C. Chapter 2711 treats arbitration as final except where statute provides otherwise | Court rejected strict-construction argument; clause treated as enforceable arbitration agreement |
| Unconscionability (procedural & substantive) | Khaledi: clause is one-sided, consumers uninformed and unable to afford AAA costs — procedurally and substantively unconscionable | Defendants: parties were aware of clause, not vulnerable, alleged arbitration costs speculative given claim size | Not unconscionable — plaintiffs knew clause, lacked evidence of oppressive costs or extreme inequality; arbitration stay affirmed |
Key Cases Cited
- Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000) (speculative or hypothetical arbitration costs do not automatically render clause unenforceable)
- Schaefer v. Allstate Ins. Co., 63 Ohio St.3d 708 (1992) (arbitration intended as final alternative method of dispute resolution under R.C. Chapter 2711)
- Hayes v. Oakridge Home, 122 Ohio St.3d 63 (2009) (procedural unconscionability analyzed under totality of circumstances; no single factor dispositive)
- Taylor Building Corp. of Am. v. Benfield, 117 Ohio St.3d 352 (2008) (party alleging prohibitive arbitration costs must present concrete proof; speculative costs insufficient)
- Eagle v. Fred Martin Motor Co., 157 Ohio App.3d 150 (2004) (arbitration clause may be unenforceable where prohibitive costs and significant disparity in bargaining power create unconscionability)
- Collins v. Click Camera & Video, 86 Ohio App.3d 826 (1993) (unconscionability requires both procedural and substantive showing)