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An Ohio appellate court has affirmed the denial of a motion to compel arbitration, deciding that the non-moving party’s “limited” education and comprehension skills, combined with certain “prohibitive” cost provisions, warranted invalidation of the entire agreement.
In Brunke v. Ohio State Home Services, Inc., No. 08CA009320, 2008 WL 4615578 (Ohio Ct. App. Oct. 20, 2008), OSHS provided Brunke with home waterproofing services under a contract containing an arbitration agreement. After a dispute arose over the quality of services, Brunke sued OSHS. OSHS moved to compel arbitration of Brunke’s claims.
The trial court initially granted OSHS’s motion and ordered arbitration, but the order was reversed on appeal with directions to conduct a hearing on the validity of the agreement. Brunke v. Ohio State Home Servs., Inc., No. 06CA008947, 2007 WL 1805026 (Ohio Ct. App. June 25, 2007). On remand, the trial court found the agreement unconscionable and denied the motion to compel.
The Court affirmed that the agreement was unconscionable. The Court found procedural unconscionability, based upon Brunke’s “limited reading ability,” low level of education, and “poor” comprehension skills. The Court also opined that OSHS had reason to know of Brunke’s ability and failed to “aid” Brunke in understanding the agreement. Because OSHS was “the stronger party” and had reason to know that Brunke was unable to protect his interests “by reason of ignorance, illiteracy, or inability to understand the language of the agreement,” the Court found the agreement procedurally unconscionable.
The Court also found the agreement substantively unconscionable, describing the cost provisions as “prohibitive.” Referring to the fee schedule and rules invoked in the agreement, the Court noted the initial arbitration fee was nearly one-tenth of the total claim, and the rules required Brunke to bear half of the total cost of arbitration. Citing the agreement’s alleged failure “to set forth any of the foregoing costs,” the Court found the cost provision sufficiently substantively unconscionable to warrant invalidation of the entire agreement.
In his dissent, Judge Whitmore maintained that the agreement was not procedurally unconscionable, noting that Brunke had sought out OSHS’s services, demonstrated the ability to contract for major purchases in the past, and admitted to not reading the agreement before signing and initialing it.
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