Ostroff v. Alterra Healthcare Corp., 433 F. Supp. 2d 538 (D. Pa. 2006)

At admission to assisted living facility, daughter who was completing documents indicated she wanted to have residency agreement reviewed by an attorney. The facility employee said that would be “pointless” because the facility would not accept any changes and resident would not be allowed to move in without a signed agreement. The agreement provided for arbitration and limited discovery, disallowing all depositions except expert witnesses. It provided for a division of costs between the parties and capped all non-economic damages at $350,000. Resident sued for injuries. Facility filed a motion to compel. The court had no difficulty determining that the agreement was procedurally unconscionable due to the facility’s superior bargaining position and the lack of choice. In finding that the agreement was substantively unconscionable, the court found that the limitations on discovery would put plaintiff at a distinct disadvantage proceeding to arbitration and would impair her ability to present her claims. The court also found it noteworthy that the facility reserved its right to proceed in court for the purpose of evicting resident while requiring resident to waive her right to access to the courts. Decided: June 7, 2006.

Note: Other courts finding arbitration agreements unconscionable where discovery is limited include: Walker v. Ryan’s Family Steak Houses, Inc., 400 F.3d 370 (6th Cir. 2005); Domingo v. Ameriquest Mortg. Co., 70 Fed. Appx. 919 (9th Cir. 2003); Geiger v. Ryan’s Family Steak Houses, Inc., 134 F.Supp. 2d 985 (S.D. Ind. 2001); Hooter’s of America, 39 F.Supp.2d 582 (D. S.C. 1998); Booker v. Robert Half Int’l, Inc., 315 F.Supp. 2d 94 (D.D.C. 2004) and Hoffman v. Cargill, Inc., 968 F.Supp. 465 (N.D. Iowa 1997). Cases upholding limits on discovery are also cited in the opinion. The court distinguished Gilmer v. Interstate/Johnson Lance Corp., 500 U.S. 20 (1991), because of the severity of the discovery limit, which did not allow resident to depose any facility employees and because the contract was one of adhesion.

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