Obligation to Arbitrate Disputes Upheld

Obligation to Arbitrate Disputes Upheld

      In a recent decision from the Kentucky Court of Appeals, there was upheld the obligation to arbitrate certain disputes with respect to allegations of negligence in a patient’s care and treatment. Specifically, there were rejected assertions that the agreement to arbitrate was procedurally and substantively unconscionable. Estate of Green Through Moore-Stuart v. LP Louisville South, LLC, No. 2018-CA-000738-MR, 2020 WL 3401188 (Ky. App. June 19, 2020).

      The patient, Alona, originally brought this action through her mother/guardian Kathleen Moore-Stewart. Alona herself passed away during the pendency of the appeal, whereupon her estate was substituted through its administratrix.

      At the time Alona was admitted to Signature Healthcare of South Louisville, an assumed name of LP Louisville South, LLC, her mother, Kathleen, signed an arbitration agreement. Eventually a complaint was filed against Signature alleging negligence in Alona’s care and treatment. Signature, in response, sought to have the matter arbitrated. That effort was opposed on the basis that the arbitration agreement was procedurally and substantively unconscionable, and as well that it could not be performed in that the identified arbitration provider, National Arbitration Forum (“NAF”), no longer existed. The trial court denied the motion to compel arbitration, and Signature appealed. In a prior decision, LP Louisville South, LLC v. Green, 2016 WL 1069034 (Ky. App. March 18, 2016), Court of Appeals held that the decision of the trial court was insufficient as to findings of fact and conclusions of law, and remanded the matter to the trial court for reconsideration. On that reconsideration, arbitration was ordered. An appeal thereof was denied on the basis that an order compelling arbitration is interlockutory in nature. Alona Green, through Her Mother and Legal Guardian Kathleen Moore-Stuart v. Signature Healthcare, LLC, No. 2016-CA-001206-MR (Ky. App. Feb. 16, 2017). Ultimately the arbitration did take place (although not before NAF) and the arbitrator found in favor of Signature. This appeal followed.

      With respect to the arguments that the agreement to arbitrate was procedurally unconscionable, allegations were made that Kathleen was misled as to its terms and implications and never provided a copy of the document for review by an attorney. The agreement to arbitrate contained a provision permitting it to be voided during the 30 days after it was executed. In her deposition, Kathleen admitted that she did not read the agreement to arbitrate before signing it. Ultimately the trial court’s findings of fact with respect to the process by which the arbitration agreement was entered into was upheld. It was ultimately found that there was no procedural unconscionability on the basis of unequal bargaining position in that entering into an agreement to arbitrate was not a condition to admission and that Alona “would have received the same quality of care and treatment irrespective of whether her mother signed [the agreement to arbitrate].” Further, as the agreement contained, a statement that entering into the agreement would waive the right to a jury, there could be no argument that its effect was concealed.

      Turning to substantive unconscionability and impossibility of performance, efforts were made to set aside the agreement on the basis that NAF no longer provides arbitration of disputes of this nature. It was also asserted that arbitration would be prohibitively expensive. Specifically:

Alona argues that because the agreement incorporates the NAF Code that can only be administered by the NAF, the arbitration agreement effectively requires the NAF as arbitrator. Because the NAF is unavailable to arbitrate the dispute, argues Alona, the agreement is impossible to perform. 2020 WL 3401188, *5.

This assertion was rejected on the basis that the agreement, in addition to referencing NAF, contained qualifiers such as “but if that is not possible” and “if possible.” Further, it provided “if the NAF process is no longer in existence at the time of the dispute, or the NAF is unwilling or unable to conduct the arbitration, then the arbitration shall be administered by another alternative dispute resolution association, pursuant to NAF rules if possible.” Id., *5-6. Hence, the agreement contemplated that the arbitration could take place other than through the NAF.

      As for the allegation that arbitration is “prohibitively expensive,” no evidence was submitted in support thereof, so the court set aside that argument.