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Harrington v. Pulte Home Corp.9/27/2005
re not available.
The affidavits submitted by the five named appellees stated they could not afford the cost of arbitration, either because they are retired and live on a "modest fixed income" or self-employed and live on a "low fixed income." In those affidavits, appellees further stated that a cost of "even a thousand dollars" for arbitration would disallow them from bringing the lawsuit. The affidavits offer no specific facts regarding appellees' financial situations, only conclusory statements. There is no showing of assets or why arbitration costs would be a hardship, let alone a prohibitive hardship as required by Randolph, 531 U.S. at 91-92. Also, appellees ignore the fact that the rules of arbitration applicable here allow for the deferral or reduction of the administrative fees associated with arbitration. The applicable AAA rule provides that ["t]he AAA may, in the event of extreme hardship on the part of any party, defer or reduce the administrative fees." AAA CONSTRUCTION INDUSTRY ARBITRATION RULES AND MEDIATION PROCEDURES R.50 (2003).
The appellees who provided affidavits assert that even $1,000 in costs would preclude them from arbitrating their case. Appellees do not explain how they expect to litigate (as opposed to arbitrate) claims of $500,000 to $1,000,000 for less than $1,000 in costs. One obvious possibility is that an attorney would take the case on a contingency basis and advance costs. That same possibility would apply to arbitration.
On this record, appellees have not met their burden of proving arbitration will be prohibitively expensive. Randolph, 531 U.S. at 92. They have not shown that any arbitration costs or fees at all will be incurred, let alone prohibitively expensive ones, as they may qualify for deferral or waiver of all fees. They do not even show arbitration will put them in any worse position than litigation in allowing them to pursue their claims. As such, the allegation that the arbitration clause is substantively unconscionable on this record is speculative at best. Enforcement of the arbitration agreement under such circumstances does not "oppress or unfairly surprise" appellees and result in "an overall imbalance in the obligations and rights imposed by the bargain." Maxwell, 184 Ariz. at 89, 907 P.2d at 58. The arbitration clause here is not substantively unconscionable.
4. Reasonable Expectations and the Arbitration Fee Schedule
Though a different legal theory, appellees' reasonable expectations argument based on the allegedly prohibitive arbitration fees also fails. We apply the seven factors from Darner that we set forth earlier. Supra 19.
As to factors (1) and (2), there were no prior negotiations or circumstances at the time of the contract that refer to the presence or absence of fees for arbitration. As to factor (3), the fee schedule is neither "bizarre or oppressive." The overall fee schedule itself is a graduated one, allowing for fees as low as $125 for a claim of $10,000 or less and $375 for a claim of $75,000 or less. AAA SUPPLEMENTARY PROCEDURES FOR THE RESOLUTION OF CONSUMER-RELATED DISPUTES C-8 (2003). As discussed, the fee schedule also contains a hardship provision to defer or waive all or part of the administrative fees and costs for a particular claimant.
As to factors (4) and (5), the fee schedule does not undercut any "nonstandard terms explicitly agreed to" or "eliminate the dominant purpose of the transaction," which in this case is the purchase of a home. As to factor (6), the fee schedule is clearly available if the signing party attempted "to check on his rights." And, as to the broad category (7) factors, there is nothing in the record that s
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