By Michelle H. Bagi
Public policy favoring arbitration is codified in Ohio‟s Arbitration Act set forth in R.C. 2711, et seq. R.C. 2711.01(A) provides that arbitration provisions shall be valid, irrevocable and enforceable. Moreover, R.C. 2711.02(B) provides that if any action is brought upon any issue referable to an agreement in writing for arbitration, the court in which the action is pending, shall, on application of one of the parties, stay the trial of the action until the arbitration of the issue has been had in accordance with the agreement.
After analyzing these statutes, the Ohio Supreme Court issued an Opinion validating and enforcing an arbitration agreement made between a long-term care facility and a resident, divesting the trial court of jurisdiction to decide a dispute between the two parties. Hayes v. Oakridge Home, 122 Ohio St.3d 63, 2009-Ohio-2054. In Hayes, the Court specifically held that an arbitration agreement, voluntarily executed by a nursing home resident upon her admission and not as a precondition to admission, is not rendered procedurally unconscionable solely by virtue of the resident‟s age. Id., at ¶44. The Court further held that an arbitration agreement, voluntarily executed by a nursing home resident and not as a precondition to admission that waives the right to trial and the right to seek punitive damages and attorney fees, is not substantively unconscionable. Id.
The Court restated the traditional analysis for purposes of examining arbitration agreements and indicated that in order to invalidate such an agreement, the arbitration provisions must be both procedurally and substantively unconscionable.
In Hayes, the Court determined that the arbitration agreement at issue was neither procedurally nor substantively unconscionable. The Court addressed the procedural unconscionability issue first and determined that the agreement clearly delineated that it was voluntary and not a condition of a resident‟s admission to the facility. Id., at ¶28. The Court further observed that by signing the agreement, the resident acknowledged she understood the terms of the agreement. Id. The Court also noted that the agreement was not a clause obscured within a lengthy contract. Id.
Next, the Court addressed the substantively unconscionability issue, and determined that the provisions in the agreement in which the resident waived the right to trial was reasonable. Id., at ¶34. Waiving punitive damages and attorneys‟ fees was also deemed reasonable since both sides were to bear their own fees and costs. Id., at ¶35. The Court concluded that both parties relinquished legal rights by agreeing to arbitrate disputes. Id., at ¶36-41.
It should be noted that a party to a contract to arbitrate waives its right when it files a lawsuit rather than requesting arbitration. Mills v. Jaguar-Cleveland Motors, Inc. (1980), 69 Ohio App.2d 111, 113. Importantly, when the defendant is confronted with a filed lawsuit, the right to arbitrate can be saved by seeking enforcement of the arbitration clause. Id. This may be done under R.C. 2711.02 by application to stay the legal proceedings pending the arbitration. "Failure to move for a stay, coupled with responsive pleadings, will constitute a defendant‟s waiver." Kellogg v. Griffiths Health Care Group, 3rd Dist. No. 9-10-59, 2011-Ohio-1733, citing Austin v. Squire (1997), 118 Ohio App.3d 35, 37, quoting Mills. When a defendant fails to raise the arbitration provision of the contract in an answer, the defendant in effect agrees to waiver, and referral to arbitration is inappropriate. Jones v. Honchell (1984), 14 Ohio App.3d 120, 122, citing R.C. 2711.
