Is Your Arbitration Agreement Unconscionable?

Published date22 February 2022
Subject MatterLitigation, Mediation & Arbitration, Arbitration & Dispute Resolution, Trials & Appeals & Compensation, Personal Injury
Law FirmStites & Harbison PLLC
AuthorMr Andrew J. Poltorak and Cassandra L. Welch (Casey)

Kentucky courts continue to closely scrutinize consumer contracts, particularly those involving arbitration provisions. In light of recent federal and state court decisions, however, the framework for analyzing the enforceability of arbitration agreements has shifted. Courts can no longer target arbitration provisions for disfavored treatment on grounds not applied to other contractual terms. See N. Kentucky Area Dev. Dist. v. Snyder, 570 S.W.3d 531, 537 (Ky. 2018) (citing Kindred Nursing Ctrs. Ltd. P'ship v. Clark, 137 S. Ct. 1421, 1425, 197 L. Ed. 2d 806 (2017)). Stated differently, an arbitration provision in a consumer contract cannot be automatically stricken as unconscionable. The Kentucky Court of Appeals recently employed a recalibrated framework in Green v. Frazier, 2020-CA-0781-MR, 2021 WL 2878360 (Ky. App. July 9, 2021), review granted (Oct. 20, 2021). The result remained unchanged - the arbitration agreement was held to be unenforceable.

The Green case involved a dispute related to Mr. Frazier's purchase of a new pickup truck from Green's Toyota of Lexington. Id. at *1. About a year after the purchase, Mr. Frazier returned to the same dealership for a routine service visit. Id. at *3. While waiting for his vehicle, Mr. Frazier became interested in another truck on the lot, and spoke with a salesperson about trading his current truck for the newer model. Id. When the salesperson provided an estimate for the trade-in value of his current truck, Mr. Frazier was surprised by the low amount. The dealership explained that the low trade-in value reflected the fact that Mr. Frazier's truck had been involved in an accident, at the dealership, prior to the date of Mr. Frazier's initial purchase. Id.

Mr. Frazier, obviously upset by the undisclosed accident, filed a lawsuit in Powell Circuit Court. Id. In response to the complaint, Green's Toyota moved to dismiss and compel arbitration pursuant to the terms of the Purchase Contract, Arbitration Addendum, and Acknowledgment all signed by Frazier. Id. Green's Toyota argued that the arbitration provisions were presented in numerous locations and it was undeniable that the claims must be submitted to arbitration.

For example, the Purchase Contract, two paragraphs above the signature line, stated: "Purchaser has read and agreed to the terms on the reverse side, including the ARBITRATION AGREEMENT provided for in Paragraph 17." The referenced Paragraph 17, on the reverse side of the page, included an...

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