Arbitration Agreement Found Unconscionable

Elder Law Answers case summary.The Court of Appeals for the Ninth Judicial District of Ohio finds that an arbitration agreement is unenforceable for procedural and substantive unconscionability. In Martin v. ManorCare Health Servs., LLC (Ohio Ct. App. No. 30866, June 12, 2024).

When Nancy Martin entered a ManorCare Health Services nursing home, she signed an arbitration agreement. After her death, when her personal representative, Raymond Martin, attempted to bring survivorship and wrongful death claims, the facility motioned to stay proceedings for binding arbitration, which he opposed.

The trial court granted the motion to stay, stating that courts must resolve disputes in favor of arbitration when the agreement is substantively conscionable and valid. Mr. Martin appealed, claiming procedural and substantive unconscionability.

Procedural unconscionability involves the circumstances when the agreement was signed, while substantive unconscionability looks to the terms of the agreement and the applicable law. Procedural unconscionability happens during the agreement’s formation when there is no voluntary meeting of the minds. To identify procedural unconscionability, courts consider the parties’ bargaining positions, any explanation of terms, and attorney representation. Substantive unconscionability concerns the agreement’s terms. Terms are unconscionable when unfair and objectively reasonable.

The agreement was procedurally unconscionable. In this case, the nursing home was the stronger, more sophisticated party with more bargaining power, while Mrs. Martin lacked legal and business acumen, experienced cognitive decline, and was under stress. The Martins had no experience with arbitration agreements. The nursing home drafted the agreement but did not explain it, and it could not identify the person who signed the agreement on its behalf. Additionally, Mrs. Martin did not have the opportunity to negotiate.

It was also substantively unconscionable. The arbitration agreement did not comply with the relevant law, R.C. 2711.23(C), because it did not state that it is solely the resident’s discretion to sign. While the agreement stated that it was voluntary, this was not sufficient. Undue influence can impact an individual’s ability to make a voluntary decision. The documents present a one-sided and positive view of arbitration. As Mr. Martin testified that no one explained the agreement to Mrs. Martin, there is no evidence that she signed it voluntarily.

No evidence suggests that Mrs. Martin had the mental capacity to agree to arbitration. The only evidence suggests that no one explained the agreement to her and that she suffered cognitive decline.

In this case, there were claims for survivorship and wrongful death. Since the arbitration agreement would not cover the wrongful death claim, enforcing it could create duplicate dispute resolution processes.

Because the agreement was procedurally and substantively unconscionable, the trial court erred by enforcing arbitration.

Read the full opinion.