Franklin County Court of Appeals Affirms Stay in Favor of Arbitration Despite $23K Arbitration Cost for Plaintiff

Last week, the Franklin County Court of Appeals affirmed a trial court’s order staying litigation pending arbitration without first holding an evidentiary hearing despite evidence that the plaintiff would be required to deposit over $23,000 with the American Arbitration Association in order to pursue her claims of disability discrimination. Shearer v. VCA Antech, Inc., 2011-Ohio-5171 (10-6-11). The plaintiff had filed suit challenging the arbitration proceedings and, in doing so, apparently only challenged the arbitration clause on the basis of procedural and substantive unconscionability under state law. She did not rely on any federal court precedent that such expensive arbitration expenses could deprive a victim of discrimination of the benefit of the Americans With Disabilities Act and, thus, be unenforceable. Thus, the Court had no difficulty finding that the arbitration agreement was enforceable when presented with documentary evidence that the plaintiff had consulted with counsel and negotiated over some of its terms and had never been concretely mislead. While the defendant employer had persuaded her to agree to the terms by claiming that it had never sought legal enforcement in the past and was unlikely to do so in the future, it wanted to reserve its right to sue in the event that she prematurely resigned her employment.

According to the Court’s opinion, the plaintiff sold her veterinary practice to the defendant employer. In doing so, she signed an agreement of sale and an employment agreement. Both contained arbitration clauses. They also both required her to remain employed for four years and precluded any voluntary resignation before that time. Before signing, she consulted with counsel and negotiated a requirement to use the AAA in the arbitration clause. The employer refused to include her proposed revision giving her the right to resign on 30 days notice. When she expressed concern, they assured her that they could not force her to continue working, but did not want her to quit right after selling the practice because of her clients would probably go elsewhere. While they had never enforced the termination clause in the past, they wanted the ability to do so in the future – just in case.

A year later, the plaintiff resigned – despite the termination clause requiring her to work four years – and the employer filed a claim with the AAA. She counterclaimed that it had failed to accommodate her disability and retaliated against her, among other things. The AAA ultimately required each party to deposit over $23,000 before proceeding to hearing. At that point, the plaintiff filed suit objecting to the cost of arbitration. There is no discussion in the decision of the Morrison v. Circuit City opinion where the Sixth Circuit found such cost sharing/shifting provisions to be inconsistent with federal employment statutes, and thus, unenforceable. Rather, the only discussion is whether the arbitration clauses – and cost shifting provisions – are procedurally or substantively unconscionable. The Court found they were not.

The plaintiff also objected to the lack of an evidentiary hearing. The Court noted that a hearing was discretionary when the party only sought to stay arbitration and were not mandatory unless the party sought to compel arbitration.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.