Saturday February 23, 2013, 9:42 am
An astonishing arbitration decision in an age of astonishing arbitration decisions

Why do courts enforce mandatory arbitration clauses? Because the contracting parties agreed to them, the courts tell us.

Not this time. A Florida intermediate appellate court held earlier this month that an arbitration clause was enforceable in a wrongful death suit against a rehabilitation center even though Jessie Holloway, the 92-year-old woman who signed the arbitration agreement, "could not possibly have understood what she was signing." Specifically:

When she entered the facility, she executed a standard resident admission and financial agreement and a separate arbitration agreement. At the time, she was 92 years old and had a fourth-grade education. She could not spell well and often had to sound out words while reading. She had memory problems and was increasingly confused.

Even though the court had no trouble accepting the trial court's finding that Ms. Holloway couldn't have understood the agreement, the court nonetheless held that "[f]or better or worse, her limited abilities are not a basis to prevent the enforceability of this contract," because "[o]ur modern economy simply could not function if a 'meeting of the minds' required individualized understanding of all aspects of the typical standardized contract."

The court is thus abandoning any pretense that arbitration must be based on consent and a knowing waiver of rights. Instead, this rule permits forced arbitration to be imposed unilaterally by the more sophisticated party to any contract. And if "[t]he agreements are sufficiently complex that many able-bodied adults would not fully understand the agreements," well, so much the better for the company imposing the terms, and so much the worse for the elderly patient who forgot to bring her lawyer when she checked in to the rehab center.

The case is Spring Lake v. Holloway, decided by Florida's Second District Court of Appeals.

Posted by Scott Michelman on Monday, February 18, 2013

Saturday February 23, 2013, 11:20 am
It's a problem: The legal criterion for responsibility for contracts is the age of majority and mental competence to handle one's own affairs, not high school, nor even elementary school, graduation. Highschool graduates today may be unable to understand an arbitration contract anyways. Theoretically, signature implies understanding, and it is just impractical to demand that all parties probe deeply to ensure tha the other truly understands a contract. This sort of arbitration isn't justice, but it's a case where universally applying justice might really not be doable.

Saturday February 23, 2013, 11:32 am
Legal precedents include nonbinding rulings if the person signed a document without reading it.

Saturday February 23, 2013, 7:36 pm
This is called a contract of adhesion, where one party has written it and the other's responsibility is to passively agree to it. Another example is an insurance policy. There is a huge body of precedent giving the passive party the benefit of the doubt when a dispute arises regarding a contract of adhesion. Ask anyone who has ever worked in insurance. Often, often, often insurance companies settle when a dispute looks otherwise winnable for exactly that reason (I should mention my background is in auto and property insurance but if anyone has worked in health or life please weigh in). Who does this court think they are to overturn over a century of precedent?

Saturday February 23, 2013, 8:01 pm
Thanks Joanne--in my life & health insurance days a label was unilateral contract where one party wrote it all and the other party had to take it as written or not take it and had no say in negotiating the language (negotiated agreements are usually called bilateral contracts)--so language always construed to the benefit of the one who didn't write. You cannot currently send a star to Joanne because you have done so within the last week.

Tuesday February 26, 2013, 5:42 am
This woman should have a legally competent guardian ad litem which can review the documents before signing on her behalf

Tuesday February 26, 2013, 3:36 pm
You cannot currently send a star to Jaime because you have done so within the last week.