2019 Ohio 3765
Ohio Ct. App.2019Background
- Zubek contracted with USA Insulation for $5,400; the written two‑page contract included a bolded arbitration clause and a three‑day consumer right to cancel.
- Work disputes followed; Zubek sued for breach, fraud, negligence, and CSPA violations seeking $150,000 and alleged structural damage.
- Defendants moved to stay pending arbitration under the contract; the trial court denied the stay, finding the arbitration clause procedurally and substantively unconscionable.
- Trial court relied in part on a projected $7,500 AAA filing fee under AAA Construction rules (three arbitrators) that it found would exceed the contract price.
- On appeal the court examined clause presentation, Zubek’s opportunity to review (he is a police officer familiar with arbitration), the availability of AAA Consumer Rules (capping filing fees), and severability of offending provisions.
- The appellate court reversed: it held the arbitration clause was not procedurally or substantively unconscionable and remanded for further proceedings consistent with arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Procedural unconscionability of arbitration clause | Zubek: no meeting of the minds; clause imposed by drafter and he didn’t fully read it | USA Insulation: clause was prominent, two‑page contract, customer told to read, right to cancel, alternative contractors available | Clause not procedurally unconscionable — clause was not hidden; Zubek had opportunity to understand and could cancel or decline |
| Substantive unconscionability — arbitration costs | Zubek: AAA Construction rules would impose prohibitive $7,500 filing fee making arbitration impracticable | Defendants: consumer AAA rules may apply (consumer filing fee capped), fees speculative, arbitrator can allocate fees or sever provisions | Clause not substantively unconscionable on cost ground — plaintiff failed to show likely oppressive costs; $7,500 scenario speculative |
| Substantive unconscionability — CSPA remedies and liability cap | Zubek: arbitration and contract cap ($5,400) would strip statutory CSPA remedies (treble damages, fees) | Defendants: arbitrator can award statutory relief and can sever/enforce liability limitation; CSPA claims arbitrable | Clause not unconscionable on this ground — CSPA claims can be arbitrated and arbitrator can address remedies and severability |
| Public‑policy challenge (confidentiality / fairness) | Zubek: arbitration is private and undermines CSPA’s goal of public notice; AAA rules may permit fee‑shifting contrary to statute | Defendants: agreement contains no confidentiality clause; case law holds CSPA claims arbitrable; offending loser‑pays terms can be severed | Public‑policy arguments rejected — no confidentiality term; fee‑shifting issue severable; arbitration permitted for CSPA claims |
Key Cases Cited
- Hayes v. Oakridge Home, 908 N.E.2d 408 (Ohio 2009) (Ohio public policy favoring arbitration)
- ABM Farms v. Woods, 692 N.E.2d 574 (Ohio 1998) (courts encourage arbitration)
- Taylor Bldg. Corp. of Am. v. Benfield, 884 N.E.2d 12 (Ohio 2008) (standard for unconscionability; party alleging both procedural and substantive defects bears burden)
- Green Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79 (U.S. 2000) (speculative risk of arbitration costs insufficient to invalidate clause)
- Lake Ridge Academy v. Carney, 613 N.E.2d 183 (Ohio 1993) (focus on whether party had reasonable opportunity to understand contract terms)
- United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574 (U.S. 1960) (arbitration is a matter of contract)
- Schaefer v. Allstate Ins. Co., 590 N.E.2d 1242 (Ohio 1992) (arbitration provides expeditious, economical dispute resolution)
- DeVito v. Autos Direct Online, Inc., 37 N.E.3d 194 (Ohio App. 2015) (offending loser‑pays provisions may be severed rather than voiding arbitration)