Arizona Court of Appeals Division One Holds that Arbitration Agreement Is Substantively Unconscionable Because Cost to Arbitrate Is Prohibitively High.

A former patient at a skilled nursing facility signed an agreement requiring him to arbitrate all disputes with the facility.  When he filed suit against the facility in the Superior Court, the facility moved to dismiss and compel arbitration.  The Superior Court held that the arbitration agreement was substantively unconscionable.

The Court of Appeals affirmed, deferring to the Superior Court’s conclusion that the patient’s income, estimated to be about $55,000 per year, was insufficient to pay the estimated $22,800 in arbitration costs.  As a result, the arbitration agreement effectively precluded the patient from redressing his claims. 

The Court of Appeals emphasized that the agreement did not provide for a reduction or waiver of arbitration fees in the event of financial hardship.  The Court specifically compared this omission to the rules of the American Arbitration Association, which rules do provide for waiver or reduction of arbitration fees. 

Judge Gould authored the opinion.  Judges Downie and Orozco concurred.