Scott Woodward v. Emeritus Corporation
368 P.3d 487
Wash. Ct. App.2016Background
- Scott Woodward, as his mother Virginia Woodward’s attorney-in-fact, signed an admission packet for Emeritus’s Richland Gardens that included a predispute arbitration agreement.
- Within months, Virginia suffered two falls during one-person assists (contrary to her two-person assist plan), broke her hip on the second fall, and died months later; the estate sued Emeritus for negligence and for violating Washington’s Vulnerable Adult Statute (RCW 74.34.200).
- The arbitration agreement broadly covered tort and statutory claims arising from assisted living services and incorporated the AAA Consumer Arbitration Rules by reference, stating arbitration "shall be administered in accordance with the procedures in effect for consumer arbitration adopted by the American Arbitration Association."
- The AAA Consumer Rules require the AAA to review consumer arbitration clauses for compliance with due process standards and permit either party to litigate if the AAA declines administration; the Rules also limit discovery, cap hearings to generally one day, and set a $1,500/day arbitrator compensation.
- The estate argued arbitration was futile because the AAA would (and likely must) decline to administer healthcare/personal-injury consumer arbitrations under its due-process standards and healthcare policy; the estate also argued substantive unconscionability (e.g., fee-shifting waiver, inadequate procedures) and procedural unconscionability.
- The trial court denied Emeritus’s motion to compel arbitration; the Court of Appeals affirmed on two alternative grounds: futility because AAA administration would be declined, and substantive unconscionability as applied to the estate’s claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether arbitration should be compelled when the AAA will likely decline to administer under its consumer/healthcare due-process standards (futility) | Woodward: AAA will decline to administer consumer healthcare/personal-injury claims under its Rules/Policy, so compelling arbitration would be futile and the estate must be permitted to litigate | Emeritus: Agreement requires only that AAA rules be followed, not AAA administration; parties can have arbitration administered by another forum or proceed under AAA rules without AAA administering | Held: Futility — the AAA Rules authorize the AAA to administer and to decline administration where due process is not assured; when AAA declines, either party may litigate. Court affirmed denial to compel arbitration. |
| Whether the agreement requires AAA (or permits a different administrator) | Woodward: Incorporation of AAA consumer rules means AAA administration and its due-process review apply | Emeritus: Parties can apply AAA rules without AAA; arbitrator or another administrator can administer if AAA refuses | Held: Court: The Rules (incorporated by reference) authorize AAA administration and R‑1(b)/(d) conditions mean AAA’s review is required; the agreement does not provide for a substitute administrator and cannot avoid the AAA due-process review by implication. |
| Whether the arbitration agreement is substantively unconscionable as applied to the estate’s negligence/vulnerable-adult claims | Woodward: The agreement’s fee and procedural limits (each party bears own fees; limited discovery; one-day hearing cap; low arbitrator compensation) unfairly undermine statutory remedies and are unsuitable for complex elder-abuse claims | Emeritus: The arbitrator can expand procedure or discard consumer presumptions; parties could select a qualified arbitrator and adjust process | Held: Substantive unconscionability — the fee-shifting waiver undermines statutory attorney-fee relief, and the consumer Rules’ limited procedures are unsuitable for complex elder-abuse claims; terms pervade the agreement, so arbitration was not compelled. |
Key Cases Cited
- LaMon v. Butler, 112 Wn.2d 193 (trial court orders on arbitration may be affirmed on any ground supported by the record)
- Gandee v. LDL Freedom Enters., Inc., 176 Wn.2d 598 (party resisting arbitration bears burden; cost-based unconscionability issues; arbitration presumptions)
- Zuver v. Airtouch Commc'ns, Inc., 153 Wn.2d 293 (discussion of substantive unconscionability in arbitration clauses)
- Adler v. Fred Lind Manor, 153 Wn.2d 331 (contract defenses including unconscionability may invalidate arbitration agreements)
- Nail v. Consolo Res. Health Care Fund I, 155 Wn. App. 227 (court may appoint substitute arbitrator when selection method fails; distinguishable where AAA consumer Rules govern)
- Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 20 (arbitration trades judicial procedures for arbitration’s informality and expedition)