Arizona Court of Appeals Division One holds that an arbitration agreement requiring one party to bear all costs and fees regardless of who prevails is unconscionable, but the offending provision may be severable.

An individual signed a contract with a company.  The contract included an agreement to arbitrate all claims arising from the contract, plus a cost-shifting provision requiring the individual to pay all “[c]osts of arbitration, including [defense]’s legal costs and attorney’s fees, arbitration fees and similar costs.”

A trial court deemed the arbitration agreement unconscionable and refused to enforce it.  The Court of Appeals affirmed that the cost-shifting provision was unconscionable because it required the individual to bear all costs and fees of arbitration, even if she were to prevail.

The Court then held, however, that the cost-shifting provision was severable under an express severability clause in the arbitration agreement.  Although severing the provision would render the arbitration agreement silent on who would bear costs and fees, such silence does not by itself render an arbitration agreement unenforceable.

Judge Perkins authored the opinion.  Presiding Judge Thumma and Judge McMurdie concurred.