Case Summary: Hayes v. Oakridge Home, Slip Opinion No. 2009-Ohio-2054 (2009)

Issue: The Ohio Supreme Court considered whether a voluntary arbitration agreement signed by a nursing home resident that was not a precondition to her admission is enforceable.

Rule: The Court determined that the agreement was valid and not procedurally unconscionable based on the resident’s advanced age or substantively unconscionable by provisions barring awards of attorney fees or punitive damages.

Facts: Florence Hayes filed a suit alleging negligence and recklessness by the Oakridge Home in connection with a fall she took while a resident. Oakridge filed – and the Court granted – a motion to compel arbitration based on a voluntary arbitration agreement Hayes signed upon her admission to the Oakridge facility. Hayes appealed to Ohio’s Eighth District Court of Appeals, arguing that the arbitration agreement was procedurally and substantively unconscionable and unenforceable. The Eighth District agreed and reversed the lower court’s order compelling arbitration after finding the agreement was both procedurally and substantively unfair. Oakridge appealed and the Ohio Supreme Court reversed the holding of the intermediate appellate court.

Discussion: Hayes was 95 years old when she was admitted to The Oakridge Home and, though it was not a precondition to her admission to the facility, she signed an agreement (i) providing that she would arbitrate any malpractice disputes that arose and (ii) disclaiming any right she had to a trial, attorney fees or punitive damages. After being injured in a fall, Hayes filed suit against Oakridge. Oakridge moved for an order compelling arbitration based on its prior agreement with the plaintiff. In the ensuing legal controversy, Hayes made two principle arguments against the validity and enforceability of the arbitration agreement: First, she contended the agreement was procedurally unconscionable because of her advanced age at the time she was asked to sign. Second, she claimed that the agreement was substantively unconscionable based upon the provisions waiving her rights to punitive damages and attorney fees.

In its ruling, the Ohio Supreme Court considered Hayes’ claims of procedural and substantive unconscionability but found neither and ultimately determined that the agreement was valid and enforceable as drafted.

With regard to Hayes’ claim of procedural unconscionability because of her advanced age, the Court stated, “Our citizens do not lose their constitutional rights and liberties simply because they age.” In this, the Court effectively held that age alone cannot serve as a basis for a claim of procedural unconscionability.

As to Hayes’ claim of substantive unconscionability, the Court stated that its determination of the issue would rely upon whether the terms of the arbitration agreement were “commercially reasonable.”

The Court’s subsequent analysis of the agreement within this framework uncovered no substantive unfairness. First, the court found the waiver of a right to a trial acceptable as such waivers are a necessary component of any agreement that purports to require arbitration of a dispute. Similarly, the Court found no problem with the provision of the agreement requiring each party to pay its own attorney fees, as such a provision is “equitable to both parties.” Finally, the Court held that although the right to seek punitive damages applied only to Hayes, that fact alone did not render the provision commercially unreasonable or unconscionable per se. Rather, by entering into the agreement, Oakridge also had to waive legal rights of its own (such as its right to seek attorney fees and court costs, actions against Hayes’ if she filed a groundless claim or the right to a dismissal for Hayes’ failure to comply with Ohio’s rules of civil procedure).

In addition to the mutual abdication of rights, the Court also relied heavily upon the fact that Hayes voluntarily signed the arbitration agreement when making its finding of no substantive unconscionability. In fact, the Court stated, “The critical factor herein is that Hayes voluntarily agreed to these terms and was not forced to agree. She had the opportunity to reject a waiver of punitive damages or any of the other terms.”

Perhaps if the arbitration agreement had been a precondition to her admission to Oakridge the Court would have ruled differently. Under the facts of this case, however, the agreement was not substantively unconscionable and, therefore, enforceable.