Defendant cannot avail itself of unfair arbitration provision without evidence of victim's intent

One of the Federal District Judges serving in the Eastern District of Michigan had occasion this month to address a controversy regarding an alleged binding arbitration agreement.  In Estate of Vunies High v. Capital Senior Living, Judge David Lawson wrote an excellent opinion addressing the issues involved in a contract of adhesion attempting to deny residents of an assisted living facility of their right to a jury trial.

Vunies High died when she was apparently locked out of her 24-hour care facility and froze to death.  Seven years earlier, when she moved into the facility, she had been presented with a unilateral arbitration agreement which bound her--but not the facility--to arbitration of any dispute.  She had not signed the document, which was presented after she moved her belongings in, but she did print her name under the signature line.  The Defendant argued that her action in staying in the facility after being presented with the agreement terms constituted the implication of a binding agreement.

Initially, Judge Lawson pointed out that Congress has passed an Act in 1925 "to reverse the longstanding judicial hostility to arbitration".  Under the FAA, such agreements are fully valid and binding.  Furthermore, Michigan allows for an unsigned agreement to be enforced where the actions of the parties infer a meeting of the minds.  Nor, under Michigan law, was the Defendant required to recite a separate consideration for Ms. High's assent to arbitration to be binding.  Nevertheless, since this agreement would waive Ms. High's right to a jury trial and to the normal and appropriate forum, her assent must be clearly documented and "knowing and voluntary". 

The Court noted that because an arbitration clause is not inherently unreasonable, and  because the family had not met its burden of showing that Mrs. High was pressured into accepting the arbitration clause or that she could not find assisted-living arrangements at another location, the High family had not proved that the contract was both procedurally and substantively unconscionable as required to invalidate the clause on that basis. 

The lack of a signature on this agreement, though, did deprive the Defendant of any presumption that Ms. High had voluntary accepted this contract term.  Therefore, the Court was required to examine the terms and circumstances of the waiver of Ms. High's rights to assess whether she did, in fact, knowingly and voluntarily consent to arbitration [and loss of her right to a jury trial].  Judge Lawson concluded that the assisted living facility had failed to meet this burden of proof. 

Not only had Ms. High not signed the document when it was presented after she moved in, but she also had not been allowed an opportunity to examine it in advance or to consult with counsel.  Furthermore, the agreement did not mention the inherent waiver of the right to a jury trial, and the provision was located inconspicuously on page 11 of a 13 page document. 

Given that Mrs. High was 85 years old at the time, that she suffered from some degree of "confusion" and probable dementia, that she was given no real opportunity to examine or discuss the provision, that it was a unilateral provision demanded by a party with unequal bargaining power, and that no separate consideration was paid, the Judge concluded that the Defendant had not met its duty to establish a "knowing and voluntary" surrender of an important federal right.  On that basis, he refused to enforce the one-sided arbitration provision.  The Defendant institution will have to explain to a jury how a patient paying for 24-hour care and supervision was allowed to freeze to death.