Almost everyone has signed a phone contract, home-repair agreement, or other contract filled with terms and provisions they might not fully understand, or navigated a website only to receive a prompt to “accept these terms and conditions” before continuing. Most, and hopefully all attorneys, have that moment of hesitation – right before they click “yes.”
If you clicked “yes” or signed the contract, and the contract included an “arbitration clause,” you may have just signed away your right to access the court system; and you didn’t even know it. But are such arbitration agreements enforceable? Generally, these clauses are enforceable and found to be consistent with a strong public policy in favor of arbitration. However, a recent decision from the Louisiana Supreme Court places arbitration clauses in consumer transactions under scrutiny and may render arbitration provisions unenforceable in some cases.
In Duhon v. Activelaf, LLC, 2016-0818 (La. 10/19/16), the plaintiff brought a negligence suit against an indoor trampoline park. In an effort to prevent a formal trial, the defendants attempted to enforce the arbitration clause found in the Participant Agreement, Release, and Assumption of Risk document that was electronically signed by plaintiff to gain entry into the trampoline park. In this setting, the Court applied a “contract of adhesion” analysis to test the validity of the arbitration clause.
The Court set forth the following factors to gauge the enforceability of the arbitration clause: (1) the physical characteristics of the arbitration clause; (2) the distinguishing features of the arbitration clause; (3) the mutuality of the arbitration clause; and (4) the relative bargaining strength of the parties.
Under the facts in Duhon, the Court found that the lack of distinguishing features and the specific placement of the text served to conceal the arbitration clause from the plaintiff. While the arbitration language was consistent in size and font with the other contractual provisions, the clause was located in the eleventh line of a paragraph that covered multiple topics. The arbitration agreement also required only the plaintiff to arbitrate any dispute. Further, it required the plaintiff to pay $5,000 if he ignored the arbitration clause and instead filed a lawsuit. According to the Court, this “lack of mutuality” supported its conclusion that the arbitration clause was adhesionary.
Ultimately, the Duhon Court struck down the arbitration clause. While courts generally uphold arbitration clauses, especially in a commercial setting, Duhon shows that arbitration clauses are not per se valid and that the consumer, in some cases, still may have their day in court.