Sosa v. Paulos
Utah Supreme Court- 1996
- P was a patient of D, an orthopedic surgeon. P signed an arbitration agreement an hour before her surgery. She did not read the agreement before signing it.
- Immediately after the surgery, P became aware of a surgical complication.
- P sued D, D moved to compel arbitration.
- Trial court denied D's motion to compel arbitration.
- UT Supreme Court remanded to the trial court…
- If P did receive a copy of the agreement and was not precluded form exercising her right to revoke the agreement within the 14 day period, trial court must sever the third clause of Article 3 (about patient paying arbitration fees if they receive half or less of what they request in damages) and enforce the rest of the agreement (including arbitration).
- If P did not receive a copy or did but was somehow precluded from revoking it within the 14 day period, the trial court must hold the entire agreement unconscionable.
- How can a contract/arbitration clause be deemed unconscionable?
- A court will find a contract to be unconscionable only when the inequality of the bargain is so manifest as to shock the judgment of a person of common sense, and where the terms are so oppressive that no reasonable person would make them on the one hand, and no honest and fair person would accept them on the other.
- A party asserting a contract is conscionable must prove both procedural (bargaining naughtiness, unfair surprise, lack of meaningful choice, inequality of bargaining power) and substantive unconscionability (harsh, one-sided, and oppressive contract terms).
- Substantive Unconscionability…
- The requirement that the arbitration panel consist of neutrally selected orthopedic surgeons does not rise to the level of substantive unconscionability.
- The requirement that a patient who wins less than half the amount of damages sought in arbitration to pay for the costs is substantively unconscionable on its face.
- Procedural Unconscionability…
- Factors in determining include….
- Whether each party had a reasonable opportunity to understand the terms and conditions of the agreement
- Whether there was a lack of opportunity for meaningful negotiation
- Whether the agreement was printed on a duplicate or boilerplate form drafted solely by the party in the strongest bargaining position
- Whether the terms of the agreement were explained to the weaker party
- Whether the aggrieved party had a meaningful choice or instead felt compelled to accept the terms of the agreement
- Whether the stronger party employed deceptive practices to obscure key contractual provisions.
- The arbitration agreement was not negotiated in a fair manner; the parties did not have a real and voluntary meeting of the minds.
- While it is true that a party has a duty to read and understand the terms of a contract, that duty is obviated when the party's failure to do so results form the procedurally unconscionable behavior of the party in the stronger bargaining position.
- Despite these shortcomings, the agreement's revocation clause (gave P 14 days to unilaterally review and revoke the agreement) cures any taint of unconscionability. During these 14 days, P would not have been forced to make a decision in a hurried, rushed, or anxious state, and her decision to revoke or not would have been a meaningful choice.
- The entire agreement should be held unconscionable since there is uncontroverted evidence that P did not read the agreement, P could not recall ever signing an arbitration agreement, neither D nor any member of his staff ever discussed the agreement with P.
- Because of D's procedurally unconscionable behavior, P was unaware of the presence of an arbitration agreement when P awoke from surgery.
- Issues that the court looked at…
- Patient was presented with the arbitration clause directly before surgery.
- Arbitrators all had to be orthopedic surgeons.
- The P could have won the arbitration and still have had to pay the attorney's fees for the other side and compensate the D for time spent on the case.
- Majority and minority agreed that there was procedural unconscionability, that using orthopedic surgeons was fine, and that the provision about the P paying for fees was ridiculous.
- The majority disagreed with the minority about the importance of the revocation clause.