When Is an Arbitration Provision So Unconscionable to Be Unenforceable?
Kegler Brown Construction Newsletter December 1, 2005
More and more companies have been inserting arbitration provisions in their contracts with consumers, including many homeowner construction contracts. There have been a series of recent cases that have held that arbitration provisions are not enforceable against consumers if the filing fees are so disproportionate to the amount in controversy that they are a deterrent to exercising the right to arbitration by charging more than it would cost to file a lawsuit.
An Ohio case dealing with a home construction contract has found the arbitration provision unconscionable because (1) the contract prepared by the builder was supposedly a "contract of adhesion" that could never be modified by the unrepresented and unsophisticated consumers ; and (2) the AAA fees were supposedly so high as to be unaffordable to the homeowners. Porpora v. Gatliff Building Co., 160 Ohio App.3d 843, 2005-Ohio-2410.
Cases like this put into question whether builders or others will be able to draft arbitration clauses that will be enforced against unsophisticated homeowners. This law should have no impact upon arbitration provisions negotiated between sophisticated companies involved in commercial construction.