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According to an Indiana state court, the allegedly prohibitive cost of arbitration must be shown conclusively, free of speculation, in order to render an arbitration provision unconscionable.
In Roddie v. North American Manufactured Homes, Inc., 851 N.E.2d 1281 (Ind. Ct. App. 2006), the Roddies purchased a manufactured home from North American Manufactured Homes (NAMH). The purchase agreement included an arbitration provision, and when the Roddies filed suit for breach of contract, NAMH moved to compel arbitration.
The trial court granted NAMH’s motion, and the Roddies appealed. On appeal, the Roddies argued that the arbitration provision was unconscionable because it required them to pay all of the arbitration fees.
The Court rejected the Roddies’ argument that the agreement was unconscionable because of prohibitive costs. Even though the Roddies presented evidence of their poor financial situation, they did not provide evidence of the cost of arbitration.
The Court determined that the costs were “too speculative” to justify invalidating the agreement and that “the Contract also provides for the chance that they will receive more money in damages than they will pay in arbitration fees.”
The Roddies failed to show that paying all of the arbitration fees would be cost prohibitive, and the Court affirmed the trial court’s order to stay the proceedings pending arbitration.
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