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Mandatory Arbitration Clauses in Medical Negligence Cases

by Karen M. Rabenau


3. EXCESSIVE OR DISPROPORTIONATE FINANCIAL BURDEN

Several jurisdictions have struck down arbitration clauses as unconscionable due to the financial burden imposed upon the consumer. For example, in Myers v. Terminix International Company, an Ohio Court struck down a mandatory arbitration clause due to undisclosed filing fees that were exorbitant when compared to the size of the claim. Myers v. Terminix Int’l Co., 91 Ohio Misc.2d 41, 697 N.E.2d 277 (Ohio 1998). The plaintiff asserted a punitive damages claim in the amount of $2,000,000, thus under AAA Rules, she would be required to pay a $7,000 filing fee. Plaintiff also had a claim for treble damages based on the Consumer Sales Practices Act. Because her claimed property damage exceeds $41,000, her potential treble award would be over $120,000; the nonrefundable filing fee on that amount would be $2,000. Thus, her filing fee for arbitration would exceed the amount that she paid on the contract by thirty- three percent. Plaintiff filed an affidavit in opposition to the motion to stay, explaining that she did know at the time of contracting that she would be required to pay an arbitration filing fee and that she did not know that the fee would be so high:

In Ohio, "[t]he basic test of unconscionability of contract is whether under circumstances existing at the time of making of the contract and in light of general commercial background and commercial needs of a particular trade or case, the clauses involved are so one-sided as to oppress or unfairly surprise [a] party." Neubrander v. Dean Witter, 81 Ohio App.3d 308, 311-312, 610 N.E.2d 1089, 1091 (1992). There is no dispute that Myers was unaware of the undisclosed arbitration requirements. Such exorbitant filing fees, "agreed to" unknowingly, would prevent a consumer of limited resources from having an impartial third party review his or her complaint against a business-savvy commercial entity. Therefore, the court finds that the undisclosed filing fee requirement in this case is so one-sided as to oppress and unfairly surprise Myers. Thus, the court finds that the clause is properly revocable. . . . Accordingly, the court finds that the arbitration clause is unenforceable in this case.

Myers, 91 Ohio Misc.2d at 47, 697 N.E.2d at 281.

Next, in Shankle v. B-G Maintenance Management of Colorado, Inc., an arbitration clause which an employee entered into as condition of continued employment, and which required him to pay one-half of the arbitrator’s fees was held unconscionable:

In this case, Mr. Shankle signed the Agreement as a condition of continued employment. The Agreement requires Mr. Shankle to arbitrate all disputes arising between he and his former employer. In order to invoke the procedure mandated by his employer, however, Mr. Shankle had to pay for one-half of the arbitrator's fees. Assuming Mr. Shankle's arbitration would have lasted an average length of time, he would have had to pay an arbitrator between $1,875 and $5,000 to resolve his claims. Mr. Shankle could not afford such a fee, and it is unlikely other similarly situated employees could either. The Agreement thus placed Mr. Shankle between the proverbial rock and a hard place--it prohibited use of the judicial forum, where a litigant is not required to pay for a judge's services, and the prohibitive cost substantially limited use of the arbital forum.

Shankle, 153 F.3d 1230, 1235 (10th Cir. 1999).

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