Rude v. NUCO Edn. Corp. , 2011 Ohio 6789 ( 2011 )

[Cite as Rude v. NUCO Edn. Corp., 2011-Ohio-6789.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
BARBARA J. RUDE, et al. C.A. No. 25549
Appellees
v. APPEAL FROM JUDGMENT
ENTERED IN THE
NUCO EDUCATION CORPORATION, COURT OF COMMON PLEAS
dba NATIONAL INSTITUTE OF COUNTY OF SUMMIT, OHIO
TECHNOLOGY, et al. CASE No. 2010-01-032
Appellants
DECISION AND JOURNAL ENTRY
Dated: December 30, 2011
DICKINSON, Judge.
INTRODUCTION
{¶1} When a number of nursing students of the RETS School of Nursing at the
National Institute of Technology in Cuyahoga Falls learned that the program they had entered
was not accredited, they sued the school. Their claims included violation of the Ohio Consumer
Sales Practices Act, breach of contract, fraud, unjust enrichment, promissory estoppel, and
negligence. The claims were based on allegations that the school had actively misrepresented its
accreditation in order to induce them to secure thousands of dollars in federal education loans to
enter the program. The school moved to stay the proceedings pending arbitration, and the
students opposed the motion, arguing that the arbitration provision in the enrollment agreement
was unconscionable. Following an evidentiary hearing, the trial court determined the arbitration
agreement is unenforceable and denied the school’s motion to stay. The school has appealed that
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decision. This Court affirms because the arbitration provision is unenforceable as it is both
procedurally and substantively unconscionable.
BACKGROUND
{¶2} Barbara Rude and Jessica Canfield filed suit against NUCO Education
Corporation dba National Institute of Technology, Aimee Dennison, Education Affiliates Inc.,
RETS Tech Center Inc. dba RETS College, and ten John Does. The named defendants included
the two schools that promoted the nursing program, an admissions representative, and her direct
employer. Two months later, Sonja Flynn sued the same defendants, alleging similar claims.
Soon after that, Ms. Rude and Ms. Canfield amended their complaint and added Michelle Stover,
Lacey Stoops, and Melissa Welker as party plaintiffs. They also moved to consolidate their case
with that of Sonja Flynn. The trial court granted that motion.
{¶3} Meanwhile, the school defendants moved to dismiss or stay the proceedings
pending arbitration. The students opposed the motion, arguing the arbitration clause could not be
enforced against them because it was both procedurally and substantively unconscionable. The
trial court held an evidentiary hearing and ruled in favor of the students, precipitating this appeal.
{¶4} According to the students, their future educational and professional options are
severely limited by participation in an unaccredited nursing program. They testified that,
knowing that to be the case, prior to enrolling in the program, they asked the admissions
representative whether the program was accredited. Each student testified that she was told that
it was accredited when, in fact, it was not.
{¶5} The students testified that they each had a single meeting with Ms. Dennison that
ended with them signing a “Retail Installment Contract” and an “Enrollment Agreement.” The
students promised to pay approximately $25,000 each for the course of instruction culminating in
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an occupational associate degree in registered nursing. The enrollment agreement is printed on a
legal size piece of paper with single-spaced small print following the hand-written area
describing the individual applicant. The arbitration provision appears on the back of the pre-
printed form in the same size font as the rest of the page:
“Any disputes or claims arising out of or relating to this Agreement (including
any claims against the Institute, any affiliate of the Institute or any Institute
affiliate’s officers, directors, trustees, employees, or agents) shall be resolved by
individual binding arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect, and judgment on
any award by the arbitrator(s) may be entered in any court having jurisdiction.
The parties agree that this transaction involves interstate commerce and therefore
the Federal Arbitration Act and related federal judicial procedure shall govern this
Agreement to the fullest extent possible. The parties agree that any dispute
subject to arbitration shall not be adjudicated as a class action or a consolidated
class arbitration proceeding either in court or under the rules of the American
Arbitration Association. The parties agree that a student’s responsibility to pay
administrative fees, filing fees, processing fees, arbitrator compensation, and
services charges for arbitration proceedings conducted by the American
Arbitration Association under this Agreement shall be limited to no more than
$125.00 for claims under $10,000 and $375.00 for claims between $10,000 but
less than $75,000, or for claims not seeking monetary compensation. The
arbitrator is allowed to ignore this limit, except as prohibited under applicable
arbitration rules, should the arbitrator find that the student filed a frivolous
claim(s) or unnecessarily delayed the arbitration proceedings. Except as may be
required by law, neither a party nor an arbitrator may disclose the existence,
content or results of any arbitration conducted pursuant to this provision without
the prior written consent of both parties.”
{¶6} Each of the students is a licensed practical nurse who comes from modest
financial means and hoped to increase her earning power by becoming a registered nurse
following graduation from the National Institute of Technology, now known as Fortis College.
The National Institute of Technology is a for-profit private career college. The students said
that, during individual meetings with the nursing recruiter, Aimee Dennison, they were pressured
to sign the agreement immediately or risk losing their spot in the next class. The students
testified that, although there are other nursing programs in the area, they take longer to complete
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and have waiting lists. The students testified that they did not read the enrollment agreement
word for word during their meeting with Ms. Dennison, but merely “skimmed” it before signing.
None of them knew what arbitration was or asked any questions about the arbitration provision.
Ms. Dennison testified that, although she interviews hundreds of applicants each year, she has
never been asked a question about the arbitration provision and she has not mentioned it when
meeting with prospective students. In fact, Ms. Dennison testified that she did not understand
the arbitration provision herself. In any event, she said that she had no power to alter any of the
terms of the agreement.
ARBITRATION
{¶7} The school defendants’ sole assignment of error is that the trial court incorrectly
denied their motion to dismiss or compel arbitration because it incorrectly determined that the
arbitration clause is unconscionable and, therefore, unenforceable. The students have accused
the school of fraudulently inducing them to take on thousands of dollars of debt to pursue an
unaccredited degree. In order to defeat a motion to stay pending arbitration, however, “a party
must demonstrate that the arbitration provision itself in the contract at issue, and not merely the
contract in general, was fraudulently induced.” ABM Farms Inc. v. Woods, 81 Ohio St. 3d 498,
syllabus (1998). “Arbitration agreements are ‘valid, irrevocable, and enforceable, except upon
grounds that exist at law or in equity for the revocation of any contract.’” Taylor Bldg. Corp. of
Am. v. Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938, at ¶33 (quoting R.C. 2711.01(A)).
Unconscionability is a valid basis for revoking a contract. Id.
{¶8} “Unconscionability includes both ‘an absence of meaningful choice on the part of
one of the parties together with contract terms which are unreasonably favorable to the other
party.’” Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938, at ¶34
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(quoting Lake Ridge Academy v. Carney, 66 Ohio St. 3d 376, 383 (1993)). “The party asserting
unconscionability of a contract bears the burden of proving that the agreement is both
procedurally and substantively unconscionable.” Id. (citing Collins v. Click Camera & Video
Inc., 86 Ohio App. 3d 826, 834 (1993) (“One must allege and prove a ‘quantum’ of both prongs
in order to establish that a particular contract is unconscionable”)).
{¶9} “The issue of unconscionability is a question of law.” Eagle v. Fred Martin
Motor Co., 157 Ohio App. 3d 150, 2004-Ohio-829, at ¶12. Therefore, this Court reviews a trial
court’s unconscionability decision de novo. Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St.
3d 352, 2008-Ohio-938, at ¶2. The question, however, necessarily requires a case-by-case
review of the facts and circumstances surrounding the making of the agreement. Eagle, 2004-
Ohio-829, at ¶13. To the extent that conflicts in the evidence must be resolved via an evaluation
of the credibility of witnesses, the trial court is in a better position to perform that evaluation and
this Court is deferential toward such factual findings. Taylor, 2008-Ohio-938, at ¶38.
PROCEDURAL UNCONSCIONABILITY
{¶10} The trial court held that the arbitration provision was procedurally unconscionable
because there is a disparity of bargaining power between the students and the school, the school
used high-pressure sales tactics, the provision was part of a take-it-or-leave-it adhesion contract,
and the students had no understanding of arbitration or the effect of entering into an arbitration
agreement. “Procedural unconscionability concerns the formation of the agreement and occurs
when no voluntary meeting of the minds is possible.” Brunke v. Ohio State Home Servs. Inc.,
9th Dist. No. 08CA009320, 2008-Ohio-5394, at ¶10 (quoting Porpora v. Gatliff Bldg. Co., 160
Ohio App. 3d 843, 2005-Ohio-2410, at ¶7). To evaluate procedural unconscionability, this Court
considers “the relative bargaining positions of the parties . . . and whether the party claiming that
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the provision is unconscionable was represented by counsel at the time the contract was
executed.” Porpora, 2005-Ohio-2410, at ¶7 (citing Eagle v. Fred Martin Motor Co., 157 Ohio
App. 3d 150, 2004-Ohio-829, at ¶31). Factors bearing on the relative bargaining positions of the
parties include “age, education, intelligence, business acumen, experience in similar transactions,
whether the terms were explained to the weaker party, and who drafted the contract.” Eagle,
2004-Ohio-829, at ¶31. Generally, no one factor alone determines whether a contract is
procedurally unconscionable. Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009-Ohio-2054, at
¶29. A court must consider the totality of the circumstances. Id. at ¶30.
{¶11} An adhesion contract is “a standardized form contract prepared by one party, and
offered to the weaker party, usually a consumer, who has no realistic choice as to the contract
terms.” Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938, at ¶49
(citing Black’s Law Dictionary 342 (8th Ed. 2004)). Despite Ohio’s public policy in favor of
arbitration, the Ohio Supreme Court has cautioned courts to pay special attention to arbitration
clauses in contracts between businesses and consumers. Id. at ¶50. “To be sure, an arbitration
clause in a consumer contract with some characteristics of an adhesion contract, ‘necessarily
engenders more reservations than an arbitration clause in a different setting,’ such as a
collective-bargaining agreement or a commercial contract between two businesses.” Id. (quoting
Williams v. Aetna Fin. Co., 83 Ohio St. 3d 464, 472 (1998)). In the consumer context, the Ohio
Supreme Court has warned that if “there are strong indications that the contract at issue is an
adhesion contract, and the arbitration clause itself appears to be adhesive in nature,” there is
“considerable doubt that any true agreement ever existed to submit disputes to arbitration.”
Williams, 83 Ohio St. 3d at 473. Under those circumstances, “the presumption in favor of
arbitration should be substantially weaker[.]” Id.
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{¶12} In this case, there is no doubt that the contract evidences a consumer transaction
for the provision of educational services. See R.C. 3332.16. The entire contract, including the
arbitration provision was drafted by the school, preprinted in boilerplate language, and presented
on a take-it-or-leave-it basis. Ms. Dennison testified that the school had more applicants than it
could accommodate and she had no authority to negotiate the terms of the contract even if any of
the applicants had been sophisticated enough to question them. Thus, it was a contract of
adhesion as the trial court determined. Furthermore, the arbitration provision was not a separate
document, but was part of the single-spaced fine print of a double-sided legal size piece of paper.
See Hayes v. Oakridge Home, 122 Ohio St. 3d 63, 2009-Ohio-2054, at ¶28. As this arbitration
provision appears in a consumer contract that is one of adhesion, we consider it in light of the
Ohio Supreme Court’s warning that there is “considerable doubt that any true agreement ever
existed to submit disputes to arbitration.” Williams v. Aetna Fin. Co., 83 Ohio St. 3d 464, 473
(1998).
{¶13} The trial court correctly determined that the school enjoyed a “vastly superior
bargaining position over the [students].” Although the students were all literate adults working
as licensed practical nurses, none of them had any education beyond high school and a brief
practical nursing program. None of them claimed any business education or experience and
none of them knew what the word “arbitration” meant. Ms. Dennison testified that she did not,
and, in fact, could not explain the arbitration provision to students. She testified that she did not
understand it herself. The students had some experience with other consumer contracts, such as
those for purchase of a house or car, but there was no evidence that any of the students had any
experience with or understanding of arbitration provisions.
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{¶14} The trial court determined that Ms. Dennison fulfilled a dual role as both “advisor
[to the students] as they made a major life decision” and “closing agent for the school.” This
contributed to the unequal bargaining power in the relationship. Each of the students testified
that she was experiencing financial difficulty and hoped to increase her earning power to support
her family by obtaining licensure as a registered nurse. They all needed to secure loans in order
to pay the $25,000 in tuition and fees required by the school. Ms. Dennison testified that she or a
co-worker met with each interested applicant and got to know them to help them determine
whether the nursing program would be a good fit. Following the interview, she had the power to
determine whether each applicant would be permitted to take the next step in the admissions
process. The trial court found that “[e]ach [student] testified, entirely consistently, that [Ms.]
Dennison urged her to sign the enrollment agreement during the meeting or risk losing [her] spot
in the program. This representation acted as an impetus for each [student] to sign the enrollment
form.” None of the students was represented by a lawyer when they signed the contract. In fact,
none of them knew any lawyers or had ever hired a lawyer except for help with a divorce.
{¶15} No prospective student has ever asked Ms. Dennison about the arbitration
provision or asked to consult with a lawyer before signing it. Ms. Dennison testified that she
always encouraged the students to read the agreement while she stepped out of the room to make
copies of the forms. Although she did not require the students to sign at the first meeting, she
did pressure them to sign immediately by emphasizing that the classes fill up fast and they may
well have to wait if they do not choose to sign immediately.
{¶16} The school has argued that the students were not without bargaining power
because they could have obtained the same services elsewhere. The evidence revealed that there
were a few other nursing programs in the area, but that those programs have waiting lists and,
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once begun, take longer to complete. There was no evidence of a multitude of registered nursing
programs available in the area. We note that the school has requested that this Court take
judicial notice that “there are no fewer than eleven registered nursing programs in Northeast
Ohio alone.” Under Rule 201 of the Ohio Rules of Evidence, a court may take judicial notice of
an adjudicative fact that is “not subject to reasonable dispute in that it is either (1) generally
known within the territorial jurisdiction of the trial court or (2) capable of accurate and ready
determination by resort to sources whose accuracy cannot reasonably be questioned.” Evid. R.
201(B). A court “shall take judicial notice if requested by a party and supplied with the
necessary information.” Evid. R. 201(D). We cannot take judicial notice of the number of
registered nursing programs in Northeast Ohio because the source of information offered, that is,
a link to a website for the Ohio Board of Nursing, did not supply the information in a manner
that allows for judicial notice of a discrete fact without further inquiry. There is no evidence in
the record indicating that a multitude of schools, located a similar distance from the students’
homes, offered the same program.
{¶17} The school has argued that the arbitration provision is not procedurally
unconscionable because the contract contained a five-day cancellation provision. The trial court
determined that the “five-day cancellation period may mitigate against procedural
unconscionability, [but] the arbitration clause in thi[s] case . . . is so hard to understand that the
[students] had no reasonable opportunity to protect their interest and cancel their enrollment.”
The trial court focused on the language about agreeing that the transaction involved “interstate
commerce” when it did not. In addition to using language confusing even to a reviewing court,
the provision does nothing to explain its meaning to the average consumer. Olah v. Ganley
Chevrolet Inc., 8th Dist. No. 86132, 2006-Ohio-694, at ¶26 (arbitration clause that failed to
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explain “any details about the arbitration process” deemed substantively unconscionable because
“its incompleteness is not only confusing, but misleading[.]”). “Accepting the arbitration clause
as written, plaintiffs could not have known what being bound to arbitration really meant.” Id.
The clause in this case is even less informative than the clause in Olah. In that case, the Court
considered an arbitration clause that explained “binding arbitration” with the words, “you give
up your right to go to court.” Id. at ¶19. In this case, the clause did nothing to explain the words
“binding arbitration” and “judgment on any award by the arbitrator(s) may be entered in any
court having jurisdiction.” Furthermore, whether the students read the clause thoroughly before
signing or within the five-day cancellation period is “ultimately inconsequential in this particular
case . . . [because, as discussed below,] nothing on the face of the [arbitration] clause could have
put [them] on notice of excessive, prohibitive costs associated with the arbitration.” Eagle v.
Fred Martin Motor Co., 157 Ohio App. 3d 150, 2004-Ohio-829, at ¶54. The arbitration
provision is procedurally unconscionable as applied to these students. To the extent that the
school’s assignment of error relates to procedural unconscionability, it is overruled.
SUBSTANTIVE UNCONSCIONABILITY
{¶18} The trial court held the arbitration provision is substantively unconscionable
because it prevents the students from proceeding under the Consumer Sales Practices Act,
requires them to arbitrate under commercial rather than consumer arbitration rules, denies them
access to the remedial provisions of the Consumer Sales Practices Act, mandates that they
prosecute all claims individually, and requires confidentiality. The trial court further found the
arbitration provision commercially unreasonable because it is “very difficult to understand” and
determined that “it is pretty clear the [students] could not understand it.” “Substantive
unconscionability encompasses those factors that concern the contract terms themselves[.]”
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Brunke v. Ohio State Home Servs. Inc., 9th Dist. No. 08CA009320, 2008-Ohio-5394, at ¶10
(quoting Eagle v. Fred Martin Motor Co., 157 Ohio App. 3d 150, 2004-Ohio-829, at ¶31).
“Contractual terms are substantively unconscionable if they are unfair and commercially
unreasonable.” Id. (citing Ball v. Ohio State Home Servs. Inc., 168 Ohio App. 3d 622, 2006-
Ohio-4464, at ¶7).
{¶19} The school has argued that the provision is not substantively unconscionable
because this Court has repeatedly enforced arbitration agreements in cases involving claims
made under the Consumer Sales Practices Act, Ohio courts have held that class action waivers do
not make arbitration provisions substantively unconscionable, and the confidentiality provision
does not interfere with enforcement of the statutory claims because the provision forbids
disclosure “[e]xcept as may be required by law.” The students have argued that the class action
prohibition, coupled with the confidentiality clause, renders the arbitration provision
substantively unconscionable.
{¶20} In this case, however, the confidentiality restriction is limited so as to avoid
interfering with applicable law. The contract provides that “neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration conducted pursuant to this provision
without the prior written consent of both parties,” but that restriction is limited by the words
“[e]xcept as may be required by law.” Thus, the remedial goals of the Ohio Consumer Sales
Practices Act are not stymied by the confidentiality language in the arbitration provision. On the
contrary, to the extent that the Act requires dissemination of the arbitration award or other
information about the arbitration in order to protect other consumers, the language of the contract
indicates that the law will be followed over the contract’s preference for confidentiality. See
R.C. 1345.05(A)(3).
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{¶21} This Court is “not authorized to reverse a correct judgment merely because
erroneous reasons were assigned as a basis thereof.” State ex rel. Carter v. Schotten, 70 Ohio St.
3d 89, 92 (1994). In this case, we do not agree with each of the reasons the trial court assigned
for holding this arbitration provision substantively unconscionable, nor do we agree with its
decision to give the cost issue “little weight.” Regardless, “an appellate court shall affirm a trial
court’s judgment that is legally correct on other grounds, that is, one that achieves the right result
for the wrong reason, because such an error is not prejudicial.” Cook Family Invests. v. Billings,
9th Dist. Nos. 05CA008689, 05CA008691, 2006-Ohio-764, at ¶19. In this case, we affirm the
judgment of the trial court because it correctly held the arbitration provision is both procedurally
and substantively unconscionable, regardless of the reasons it assigned.
{¶22} An analysis of this arbitration provision reveals that it is substantively
unconscionable because it prevents the students from vindicating their claims due to the
excessive cost of arbitration. Although the trial court found the students “have limited means to
pay an arbitrator,” it gave “little weight” to the cost issue because “nothing in the provision
exposes [the students] to undue or prohibitive costs.” The trial court determined that the students
would be required to pay a filing fee similar to a court of competent jurisdiction and that they
would “be exposed to additional, unspecified costs in either arbitration or civil litigation.”
{¶23} The arbitration provision provides that students asserting a claim for damages
between $10,000 and $75,000 will have their total arbitration fees capped at $375. The arbitrator
is allowed to ignore the limit, however, if he finds that the student “filed a frivolous claim[ ] or
unnecessarily delayed the arbitration proceedings.” The students argued before the trial court
that the unspecified costs, such as witness fees, and the arbitrator’s discretionary power to ignore
the fee cap could expose them to untold costs that place arbitration out of reach. Ms. Rude
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testified that she would not pursue arbitration if it exposed her to more than $1200 in costs. As a
single mother without a consistent source of income, Ms. Canfield testified that $375 is too much
for her to pursue arbitration of her claims against the school.
{¶24} Although silence of an arbitration clause with respect to costs does not, by itself,
make the clause unconscionable, “if the costs associated with the arbitration effectively deny a
claimant the right to a hearing or an adequate remedy in an efficient and cost-effective manner,”
then the clause is invalid. Felix v. Ganley Chevrolet Inc., 8th Dist. No. 86990, 86991, 2006-
Ohio-4500, at ¶21. As the students have argued to this Court, the fee cap is inapplicable in this
case, making arbitration under the provision prohibitively expensive. The students’ claims
exceed $75,000 because they seek to recover monetary damages in excess of $25,000, subject to
trebling under the Ohio Consumer Sales Practices Act. The trial court record contains a copy of
the American Arbitration Association’s Commercial Rules authenticated by a lawyer’s affidavit.
According to the standard fee schedule found in those rules, the students would be responsible
for paying an initial filing fee of $1850 and a case service fee of $750 for a claim that proceeds
to an initial hearing. These initial costs are merely the administrative costs of arbitration. Under
Rule 50, each party is also responsible for her own witnesses’ expenses and half of the cost of
“[a]ll other expenses of the arbitration, including required travel and other expenses of the
arbitrator, AAA representatives, and any witness and the costs of any proof produced at the
direct request of the arbitrator[.]” The arbitrator’s hourly rate of compensation is not specified,
but is described in Rule 51(a) as “a rate consistent with the arbitrator’s stated rate of
compensation.” Additionally, the arbitrator has the power to assess all or any part of the total
arbitration costs to either party.
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{¶25} The cost problem is further exacerbated in this case by the class action waiver
language in the provision. The provision forbids any “class action or a consolidated class
arbitration proceeding either in court or under the rules of the American Arbitration
Association.” When a number of consumers have similar claims against a company, they may
file one complaint in court and share the filing fee and additional costs associated with pursuing
that claim, as the students testified that they have done in this action. When consumers are
prevented from sharing the cost of that endeavor, it can quickly become more expensive than any
one is able to shoulder alone. In this case, the students testified that they are unable to afford
even the initial filing fee to arbitrate this case individually. See Porpora v. Gatfliff Bldg. Co.,
160 Ohio App. 3d 843, 2005-Ohio-2410, at ¶17-19.
{¶26} Ignoring the fact that the arbitration clause exposes the students to potential
liability for the entire cost of arbitration, the evidence shows that the known cost of arbitration
under this clause is unattainable for these students, making them unable to vindicate their
statutory rights. See Green Tree Fin. Corp.-AL v. Randolph, 531 U.S. 79, 90-91 (2000)
(arbitration clause not invalidated by record’s silence on the subject of arbitration costs because
silence allowed only speculation regarding whether costs would be prohibitive). From the
evidence presented to the trial court, we know that each student will be required to pay a
minimum of $1850 to file an arbitration claim and another $750 once the claim proceeds to an
initial hearing. It is not at all speculative to consider that the students will each have to pay half
of the arbitrator’s fee, even if no expenses are billed. There is no evidence in the record
regarding how much each arbitrator will charge for his services, but a fee will certainly be
charged. So, we know that the arbitration costs will exceed the filing fee. The students have
offered a link to the website for the Summit County Clerk of Courts, indicating that the cost to
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file a civil complaint is $275.00 plus a $25 fee for each summons the clerk is instructed to issue,
http://www.cpclerk.co.summit.oh.us\civilfees.asp (last visited Dec. 28, 2011). In this case, six
plaintiffs filed two complaints and served four defendants. The cost of that filing was shared
among six plaintiffs rather than being incurred individually, as would be required in arbitration
under the terms of this provision.
{¶27} As the students have testified that they cannot afford to pay even the initial filing
fee for individual arbitration under this clause, the students have met their burden of showing
that the arbitration fees they would be responsible for under the contract make vindication of
their claims through arbitration cost prohibitive. See Taylor Bldg. Corp. of Am. v. Benfield, 117
Ohio St. 3d 352, 2008-Ohio-938, at ¶59. The arbitration provision in this case is substantively
unconscionable because it is prohibitively expensive for consumers to pursue their claims under
the terms of the provision.
SEVERABILITY
{¶28} The school has argued for the first time on appeal that, if this Court deems some
part of the arbitration provision unconscionable, it should not affect the enforceability of the
remainder of that provision because the contract also includes a severability clause. The contract
provides that “[i]f any court of competent jurisdiction or governmental or accrediting agency
determines that any provision of this Agreement is invalid or unenforceable, such judgment shall
not invalidate any other provision of this Agreement.”
{¶29} The school has cited the Ohio state court cases of Ignazio v. Clear Channel
Broadcasting Inc., 113 Ohio St. 3d 276, 2007-Ohio-1947, at ¶12, Bozich v. Kozusko, 9th Dist.
No. 09CA009604, 2009-Ohio-6908, at ¶10, and Broughsville v. OHECC LLC, 9th Dist. No.
05CA008672, 2005-Ohio-6733, at ¶27-33, in support of its argument. The students have
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correctly argued that those cases are not similar to the situation in this case. Ignazio, 2007-Ohio-
1947, at ¶17 (sentence in arbitration clause providing expanded judicial review contrary to state
law was unenforceable and severable); Broughsville, 2005-Ohio-6733, at ¶22 (the designated
arbital forum was unavailable, but term could be severed from the arbitration agreement);
Bozich, 2009-Ohio-6908, at ¶10 (limitation of liability to price of home inspection was
unconscionable and severable). In each of those cases, the court severed a discrete term of the
arbitration provision and enforced the remainder of it. In this case, we need not consider how the
cost of arbitration could be severed from this agreement because the school has forfeited its right
to raise this issue by failing to raise it before the trial court. Eisenbrei v. Akron, 9th Dist. No.
25788, 2011-Ohio-5777, at ¶12 (citing Thrower v. Akron Dep’t of Public Hous. Appeals Bd., 9th
Dist. No. 20778, 2002-Ohio-3409, at ¶20). To the extent that the school’s assignment of error
addresses substantive unconscionability, it is overruled.
CONCLUSION
{¶30} The school’s assignment of error is overruled. The trial court correctly held that
the arbitration provision in this consumer contract is both procedurally and substantively
unconscionable and, therefore, unenforceable. The judgment of the Summit County Common
Pleas Court is affirmed.
Judgment affirmed.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
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Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellants.
CLAIR E. DICKINSON
FOR THE COURT
BELFANCE, P. J.
MOORE, J.
CONCUR
APPEARANCES:
DOUGLAS B. SCHNEE and LUCY K. O’SHAUGHNESSY, Attorneys at Law, for Appellants.
WILLIAM DOWLING and JOSHUA D. NOLAN, Attorneys at Law, for Appellees.