Lead Opinion
{¶ 1} Rivеrfront Diversified, Inc., d.b.a. Everdry Waterproofing (“Everdry”), appeals from the trial court’s decision and entry denying its motion to stay proceedings and to compel arbitration.
{¶ 2} Everdry advances two assignments of error on appeal. First, Everdry contends that the trial court erred in failing to conduct a hearing before denying its motion. Second, Everdry claims that the trial court erred in refusing to enforce the parties’ arbitration agreement.
{¶ 3} The record reflects that appellee Geraldine Moran contactеd Everdry about repairing cracks in her home’s foundation. In January 2009, Everdry representative Eddie Joiner inspected the home and gave Moran an estimate for the work. Moran and Joiner proceeded to sign a contract to have Everdry perform the work. The terms and conditions of the contract included the following language regarding arbitration:
{¶ 4} “Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration in accordance with the Construction Industry Arbitrаtion Rules of the American Arbitration Association, and judgment upon the award rendered by the Arbitrator(s) may be entered in any Court having jurisdiction thereof.”
{¶ 5} Shortly after the parties signed the contract, Everdry completed its work. Thereafter, on May 3, 2010, Moran filed a complaint against Everdry, alleging that the company had failed to repair her foundation. According to the complaint, the cracks had worsened since Everdry completed its work. Moran’s complaint set forth statutory and common-law claims against Everdry. She sought actual damages of more than $20,000, statutory damages in excess of $62,000, and punitive damages of $180,000.
{¶ 6} In July 2010, Everdry moved to stay proceedings and to compel arbitration pursuant to the arbitration clause quoted above. Moran opposed the motion, arguing that the arbitration clause was procedurally and substantively unconscionable and, therefore, unenforceable. Everdry filed a reply in which it noted the absence of evidence to support Moran’s claims. Attached to the reply was an
{¶ 7} On March 21, 2011, the trial court filed its decision and entry denying Everdry’s motion to stay proceedings and to compel arbitration. The trial court correctly analyzed the applicable law, which requires the opponent to an arbitration clause to prove that the clause is both procedurally and substantively unconscionable before the court will decline to enforce it. Brownell v. Van Wyk, Montgomery App. No. 24042,
{¶ 8} In evaluating the facts before it, the trial court stated:
{¶ 9} “In this case, the contract was a standard form contract prepared by Defendant and issued to Plaintiff. As such, the Court finds the contract was adhesive in nature. Moreover, Plaintiff has averred that she is 88 years old, lives at home, and has little business experience. Plaintiffs letter sent to the Defendant and attached as Exhibit 1 to Defendant’s reply may bear on Plaintiffs claims, and tends to suggеst a general level of comprehension by Plaintiff of the services rendered by Defendant. However, this evidence does not bear on the enforceability of the arbitration provision or Plaintiffs understanding of this provision. Based on the foregoing facts, the Court finds the arbitration provision was procedurally unconscionable.
{¶ 10} “As to whether the provision is substantively unconscionable, Defendant’s estimator avers that he ‘specifically went through the terms and conditions’ with Plaintiff. Plaintiff avers that she did not understand the arbitration provision, has never been involved in arbitration, and that the estimator did not explain that by signing the contract she would be giving up her right to have her day in court. Plaintiff avers that the estimator did not explain how the arbitration process would work, provide information about the arbitration process, explain that the arbitration process can be expensive, explain that by signing the contract she would have to pay for arbitration, or explain the papers that she signed when Defendant completed its work. Citing to thе Construction Industry Arbitration Rules and Mediation Procedures, Plaintiff represents that she would be responsible for a $975 filing fee, administrative fees and various expenses, the arbitrator’s hourly compensation fee (minimum 4 hours) and a final fee of $300. These projected costs have not been disputed. The damages sought by Plaintiff do not bear on the costs the Plaintiff will incur if her case is arbitrated, or on her awareness of those costs prior to signing the contract. The Court finds that the mechanics of the arbitration process and its costs were not explained to the Plaintiff, and therefore the arbitration provision is substantively unconscionable under the circumstances of this case.”
{¶ 12} Upon review, we find that the trial court’s failure to conduct an evidentiary hearing before ruling on Everdry’s motion to compel arbitration is not inherently reversible error. Everdry never requested an oral hearing, and both parties submitted affidavits in support of their written arguments. At least three other Ohio appellate courts have concluded that a party waives its right to an R.C. 2711.03 hearing by failing to request one. Hoppel v. Feldman, Columbiana App. No.
{¶ 13} Defendant’s Motion to Stay Proceedings and Compel Arbitration was filed on July 22, 2010, and the only evidentiary material presented was the attached home-repair contract, front and back, containing the arbitration clause. On August 5, 2010, the plaintiff homeowner filed Plaintiffs Response to Defendant’s Motion to Stay Proceedings and Compel Arbitration, without any evidentiary material. On August 11, 2010, the defendant filed its Reply Memorandum in Support of the Motion to Stay Proceedings and Compel Arbitration, with Accompanying Affidavit of Eddie Joiner. In that reply, the contractor strongly argued that it was the plaintiffs burden to prove that the arbitration clause was procedurally and substantively unconscionable, and, because plaintiff presented no evidence whatsoever, the motion to compel should be granted. Only thereafter did the plaintiff seek, and obtain, leave to submit her surreply, filed on September 16, 2010, which included the affidavit of plaintiff in оpposition to the motion to compel. At that time, plaintiff argued, “Since the arbitration clause at
{¶ 14} Normally, we would determine that a party cannot fail to request a hearing below, submit written evidenqe to the trial court, and complain about the lack of a hearing only after obtaining an adverse ruling. But here, although the appellant did not request a hearing, the party that submitted the last permitted filing had requested a hearing. Moreover, the court did not determine as a “matter of law that Everdry’s motion is without merit” as suggested by the plaintiff. The court’s determination was a mixed question of law and fact based on the circumstances of this particular plaintiffs status. Therefore, although we will overrule appellant Everdry’s first assignment of error, upon remand on the following second assignment of error, the court should conduct the evidentiary hearing requested by the plaintiff.
{¶ 15} The first assignment of error is overruled.
{¶ 16} In its second assignment of error, Everdry claims that the trial court erred in refusing to enforcе the parties’ arbitration agreement. In particular, Everdry disputes the trial court’s finding that the arbitration clause at issue was procedurally and substantively unconscionable. In response, Moran asserts that the trial court properly found the clause unenforceable because it deprived her of any meaningful choice and contained terms unreasonably favorable to Everdry.
{¶ 17} In resolving the parties’ dispute, we turn first to R.C. 2711.01(A), which reflects “a strong policy favoring arbitration of disputes.” Taylor Bldg. Corp. of Am. v. Benfield,
{¶ 18} One ground for revocation of a contract is unconscionability. Brownell v. Van Wyk, Montgomery App. No. 24042,
{¶ 19} To determine whether an arbitration provision is procedurally unconscionable, courts consider the circumstances surrounding the making of the agreement. Id. at ¶ 27. Relevant considerations include the parties’ age, education, intelligence, business acumen and experience, who drafted the contract, whether alterations in the printed terms were possible, and whether alternative sources of supply for the product or service were available. Id. Other factors that may indicate procedural unconscionability include “ ‘a belief by the strоnger party that there is no reasonable probability that the weaker party will fully perform the contract; knowledge of the stronger party that the weaker party will be unable to receive substantial benefits from the contract; knowledge of the stronger party that the weaker party is unable to reasonably protect his interests by reason of physical or mental infirmities, ignorance, illiteracy or inability to understand the language of the agreement, or similar factors.’ ” Id. at ¶ 28.
{¶ 20} To determine whether an arbitration provision is substantively unconscionable, courts focus on the terms of the provision itself. “Factors courts have considered in evaluating whether a contract is substantively unconscionable include the fairness of the terms, the charge for service rendered, the standard in the industry, and the ability to accurately predict the extent of future liability.’ ” Id. at ¶ 29, quoting Hayes v. Oakridge Home,
{¶ 21} Some of the facts submitted by affidavit were in dispute. Eddie Joiner’s affidavit states that he went through the terms and conditions of the contact with Ms. Moran before she signed it. “At no point did Ms. Moran express to me, nor did it appear to me from my observations, that she lacked the ability to understand and comprehend any of the terms of the agreement.” Ms. Moran’s affidavit admits that she signed the contract but argues she should not be held to its terms by stating, “I did not understand the provision regarding arbitration,” and “Everdry’s representative did not explain to me that, by signing the Contract, I would be giving up my right to have a day in court.”
{¶ 22} Based on this scant record, the trial court cited four reasons for finding the arbitration clause procedurally unconscionable: (1) it was “adhesive in nature,” (2) Moran is 88 years old, (3) Moran lives at home, and (4) she has “little business experience.” Although the record supports these factual findings, we
{¶ 28} “A contract of adhesion is one in a standardized form that is prepared by one party and offered to the weaker party, usually a consumer, who has no realistic choice as to the contract terms.” Hawkins v. O’Brien, Montgomery App. No. 22490,
{¶ 24} As set forth above, aside from the adhesive nature of the arbitration clause (i.e., it was contained in a preprinted form presented by Everdry),
{¶ 25} Although she was 88 years old, Moran lived independently and managed her own affairs. She initiated contact with Everdry and requested an estimate to have her home repaired. After receiving the estimate, she signed a contract indicating that she had read the “terms and conditions,” which contained the arbitration clause at issue. The clause was not hidden from view. It was printed in the same size type as all other terms and conditions. Cf. Taylor,
{¶ 26} Thus the only evidence before the trial court was that Moran, a self-sufficient elderly woman, signed a contract containing a clear arbitration provision that she acknowledged having read. There was no direct evidence that Moran suffered from any apparent infirmities that she asked questions about the arbitration provision prior to signing. Although the parties may have lacked equal bargaining power, we see no evidenсe here that in consequence of the imbalance in bargaining power, Moran “was defrauded or coerced into agreement to the arbitration clause.” Hawkins, at ¶ 24. Based on our de novo review, we find that the factual record is insufficient to support a finding of procedural unconscionability.
{¶ 27} We also believe that the record is insufficient to support the trial court’s determination that the arbitration provision was substantively unconscionable. The trial court found substantive unconscionability due to the cost of arbitration and the fact that “the mechanics of the arbitration process and its costs were not explained to the Plaintiff.” With the available facts, however, Everdry had no obligation to explain the arbitration to Moran, who, on this record, does not appear to have been misled, expressed no lack of understanding at the time, and asked no questions.
{¶ 28} As for costs, the arbitration clause itself stated that arbitration would be governed by “the Construction Industry Arbitration Rules of the American Arbitration Association.” The trial court was critically concerned about the seemingly high $975 filing fee, administration fees, arbitrator’s compensation, and final fee of $300 for filing an AAA arbitration complaint. The factual representation as to these fees appears only in argument in Plaintiffs Response to Defendant’s Motion to Stay Proceedings and Compel Arbitration. True, the Construction Industry Arbitration Rules of the American Arbitration Association provide for such fees. However, whether plaintiffs claim would be assigned to that track is not so clеar. In apparent recognition of the modest nature of homeowner-construction disputes, the AAA adopted supplementary procedures for home construction disputes in 2003. These rules have since been renamed as the AAA Home Construction Arbitration Rules and are suggested for contracts for “residential construction and remodeling.” Home Construction Arbitration
{¶ 29} Moreover, this court has determined that “proof of costs alone will not invalidate an arbitration clause.” Garcia,
{¶ 30} In opposition to the foregoing analysis, Moran relies heavily on Williams v. Aetna Fin. Co. (1998),
{¶ 31} In the years since Williams, the Ohio Supreme Court has recognized the extreme facts of that case and the role those facts played in the outcome. In Taylor, for example, the court upheld an arbitration clause in a consumer sales agreement, noting that “this is not a case like Williams, in which the defendant finance company was found to have conspired to defraud the plaintiff.” Taylor,
{¶ 32} Finally, Moran cites the Ninth District Court of Appeals’ per curiam decision in Brunke v. Ohio State Home Servs., Inc., Lorain App. No. 08CA009320,
{¶ 33} With regard to substantive unconscionability, the Brunke majority opined that “prohibitive arbitration costs and fees alone may render an arbitration provision substantively unconscionable based on a case-by-case determination.” Id. at ¶ 16. On its face, this statement is contrary to our determination several years later in Garcia that “proof of costs alone will not invalidate an arbitration clause.” In any event, as we have indicated, the facts about the eventual costs of arbitration are uncertain. Also, the present case lacks the fraud that drove the Williams decision. In addition, although the contract Moran signed had characteristics of an adhesion contract, the arbitration provision was as transparent as all other terms and conditions, Moran had a full opportunity to review the contract, and there is no evidence of compulsion or duress. Also unlike Williams, Moran herself initiated contact with Everdry about doing business and could have solicited bids from other home-rеpair companies, who may or may not have required arbitration. Cf. Baker,
{¶ 34} Because we determine that the facts submitted to the trial court by affidavit are insufficient to support a finding of procedural and substantive unconscionability, we vacate the overruling of the motion to compel arbitration. Nevertheless, we note that the plaintiff had requested an evidentiary hearing on the matter, and we remand the case for the trial court to conduct such a hearing and for further proceedings consistent with this opiniоn.
Judgment accordingly.
Notes
. The caption of the trial court's ruling indicates that it sustained the motion. The body of the ruling makes clear, however, that the caption contains a typographical error and that the motion was denied.
. But see Taylor,
Concurrence Opinion
concurring in judgment.
{¶ 35} I concur in the judgment. Although Ohio law favors arbitration, I am just not as sure, especially prior to the evidentiary hearing required by our remand, that there is no procedural or substantive unconscionability in the relationship between this buyer and this seller.