FILED 


FEBRUARY 9, 2016 


In the Office of the Clerk of Court 


W A State Court of Appeals, Division III 


IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON 


DIVISION THREE 


SCOTT WOODWARD, as the Personal ) 

Representative ofthe ESTATE OF ) 

VIRGINIA MAY WOODWARD, SCOTT ) 

WOODWARD, in his individual capacity, ) 

and CHRISTINE WOODWARD, in her ) 

individual capacity, ) 

) 

Respondents, ) 

) 

v. ) 

) 

EMERITUS CORPORATION, a ) 


Washington corporation, BROOKDALE ) 


SENIOR LIVING COMMUNITIES, ) 


INC., a Delaware corporation, F ATIMAH ) 


A WAD and JOHN DOE A WAD, a ) 


marital community, MINDY ROSS and ) 


JOHN DOE ROSS, a marital communitY, ) 


JOHN AND JANE DOES 1-10, ) 


) 


Appellants. ) 


No. 32880-5-III 

PUBLISHED OPINION 

SIDDOWAY, C.J. Emeritus Corporation, its affiliate, and two employees appeal 

the denial of their motion to compel arbitration of claims for negligence and violation of 

Washington's Vulnerable Adult Statute (RCW 74.34.200) brought against them by Scott 
No. 32880-5-III 


Woodward v. Emeritus Corp. 


Woodward, as personal representative ofthe estate of his late mother, Virginia May 

Woodward. Acting as his mother's attorney-in-fact, Mr. Woodward had signed a 

predispute arbitration agreement with Emeritus at the time he signed other agreements 

providing for Ms. Woodward's residence and care at Richland Gardens, an assisted living 

facility owned and operated by Emeritus. 

Emeritus drafted the operative language ofthe parties' agreement that 

"[ a ]rbitrations shall be administered in accordance with the procedures in effect for 

consumer arbitration adopted by the American Arbitration Association [AAA]." Clerk's 

Papers (CP) at 45. The relevant procedures adopted by the AAA contemplate that the 

AAA will administer the arbitration, and that a threshold procedural step will be for the 

AAA to review the agreement ofthe parties in order to determine whether it substantially 

and materially complies with the AAA's due process standards. Ifit does not, the AAA 

will decline to administer the arbitration and "either party may choose to submit its 

dispute to the appropriate court for resolution." CP at 321. 

The AAA can be expected to decline to administer arbitration of the dispute 

between the estate and Emeritus and its codefendants (hereafter collectively "Emeritus"). 

While Emeritus argues that the parties' arbitration can be administered by someone else, 

the plain language ofthe AAA's Consumer Arbitration Rules (unmodified in this respect 

by the parties' agreement) requires AAA administration-evidently so that the AAA can 

apply the fast and simple procedure provided by the consumer rules to only those cases 

2 

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, 

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No. 32880-5-III 


Woodward v. Emeritus Corp. 


I for which the rules will provide due process. Where the AAA decides that due process is 


i 
 not assured, the rules explicitly provide that a party may litigate. 


I The court did not err in denying the motion to compel arbitration, which would 

have been futile given the undisputed expectation that the AAA would decline to 

administer arbitration of the estate's claims. Alternatively, we find the agreement 

substantively unconscionable given the nature ofthe claims. We affirm. 

FACTS AND PROCEDURAL BACKGROUND 

In 2012, Scott Woodward, acting as the attorney-in-fact of his mother, Virginia 

Woodward, signed paperwork providing for his mother's admission, residence and care 

at Richland Gardens, an assisted living facility owned and operated by Emeritus 

Corporation. Among the admissions paperwork signed by Scotti was a predispute 

arbitration agreement. 

Within Virginia's first four months' residence at Richland Gardens, she was twice 

dropped when being moved by a staff member executing a "one-person assist," contrary 

to a personal care plan for Virginia that required "two-person assists" whenever she was 

being moved. When dropped the second time, Virginia broke her hip. She died three 

I Because we refer to three members ofthe Woodward family, we use their first 

names for the convenience of the reader. We intend no disrespect. 

3 

No. 32880-5-III 


Woodward v. Emeritus Corp. 


months later.2 Her death certificate lists the broken hip as a contributing cause of death. 

Christine Woodward, Virginia's daughter, and Scott, individually and as the 

personal representative of his mother's estate, filed suit against Emeritus. The estate 

asserted claims for negligence and for elder abuse in violation of Washington's 

Vulnerable Adult Statute, RCW 74.34.200. Scott and Christine asserted claims for 

wrongful death. 

Emeritus filed a motion to compel arbitration ofthe estate's claims, relying on the 

predispute arbitration agreement signed by Scott.3 The estate responded by moving for 

an evidentiary hearing on the motion to compel arbitration, followed up by a 

memorandum and declarations opposing arbitration. 

The arbitration agreement executed by Scott is a two-page stand-alone document 

titled "Agreement to Resolve Disputes by Binding Arbitration." CP at 45. It provides 

that if a dispute between the parties cannot be resolved through a grievance procedure, 

then, "unless expressly prohibited by applicable law," the following "shall be resolved 

exclusively by binding arbitration and not by lawsuit or resort to the judicial process": 

2 These facts are alleged in the Amended Complaint and are not denied in the 

Answer. See CP at 9-11 ~~ 16-24, CP at 241-43 ~~ 16-24 ("Ms. Woodward's chart and 

medical records speak for themselves"). 

3 Emeritus moved to compel arbitration of Scott's wrongful death claim as well, 

but has since abandoned its argument that Scott is required by the agreement to arbitrate 

his claim. 

4 

I No. 32880-5-111 

Woodward v. Emeritus Corp. 

I 

I, 

~ 

any action, dispute, claim or controversy of any kind, whether in contract or i 

in tort, statutory or common law, personal injury, property damage, legal or 

t 

i 

equitable or otherwise, arising out of the provision of assisted living 

services, healthcare services, or any other goods or services provided under 

the terms of any agreement between the Parties, including disputes 

involving the scope of this Arbitration Agreement, or any other dispute I 

I 


involving acts or omissions that cause damage or injury to either Party, 


except for matters involving evictions. 


I 
 ld. 


I 

Section 3 of the agreement, captioned "Arbitration Procedure," provides that 

"[a]rbitrations shall be administered in accordance with the procedures in effect for 

consumer arbitration adopted by the American Arbitration Association." ld. The section 

then dictates the process for selection of the arbitrator, the location of the arbitration, 

applicable law, responsibility for the arbitrator's fee and legal expenses, and the right to 

enter the arbitration award as a judgment. 

The estate did not dispute that Scott executed the arbitration agreement as 

Virginia's authorized attorney-in-fact, that it was thereby an agreement of the estate, or 

that the negligence and vulnerable adult claims asserted by the estate fell within the broad 

scope of disputes covered by the agreement. It argued that the arbitration agreement was 

unenforceable because it was both substantively and procedurally unconscionable. It 

contended that the agreement was substantively unconscionable because it required each 

side to pay one-half of the cost of the arbitrator, for each side to bear its own attorney 

fees, and because it bound Virginia to arbitration procedures that were inappropriate for 

5 

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i No. 32880-5-111 f Woodward v. Emeritus Corp. 

J 

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the type of dispute that later arose. It argued that the agreement was procedurally 

I unconscionable because it contained internally contradictory provisions and had been I

• 


I presented for execution under circumstances amounting to fraud in the execution. 


I 
 Finally, the estate argued that it would be futile for the court to compel arbitration 


because the AAA would decline to administer its claims as a consumer arbitration. 

A supporting declaration from Scott asserted he signed the arbitration agreement 

during an hour-long intake meeting with the executive director of Richland Gardens, 

Mindy Ross, during which she went over more than a dozen forms. He described their 

discussion of the arbitration agreement as follows: 

As to the arbitration agreement, 1 did not know what arbitration was so 1 

asked Mindy what arbitration meant. 

Mindy told me that if "we had an issue that might have legalities 

involved, then we would work it out face-to-face." 

Mindy then brought up the example [of a disagreement between the 

Woodwards and Virginia's prior assisted living center that had prompted 

the move to Richland Gardens] as an example of when this would be 

applicable. 

Based on this explanation, I signed the arbitration agreement under 

the power of attorney for my mom. 

Id. (paragraph numbers omitted). 

Ms. Ross had a different version of the circumstances under which the agreement 

was signed. Her declaration stated that during the admission process, Scott had executed 

the arbitration agreement, and that "[p]rior to signing, I asked Mr. Woodward ifhe had 

any questions or concerns regarding the Arbitration Agreement, and he stated that he did 

6 

No. 32880-5-111 


Woodward v. Emeritus Corp. 


not." CP at 38. She also pointed out that the arbitration agreement includes an '" opt out 

provision'" under which it may be revoked by written notice delivered to Richland 

Gardens by certified mail within 15 days of signature and that Emeritus's business 

records contained no revocation of the agreement. Id. 

I 

A hearing on the cross motions for an evidentiary hearing and to compel 

arbitration was held on October 24. Although Emeritus had opposed the motion for an 

evidentiary hearing, the trial court informed the parties' lawyers at the outset of the 

I 	 hearing that "I really only ... need argument on the motion to compel arbitration. That 

i 

I 	 will probably resolve the other." Report of Proceedings (RP) at 3. After hearing 

I 	 argument, the trial court summarily denied the motion to compel arbitration, stating, "I'm 

not going to compel arbitration, I don't think it's appropriate." RP at 19. Emeritus I 


appeals. 

I 


ANALYSIS 

We can affirm the trial court's order denying the motion to compel arbitration on 

any basis supported by the record. LaMon v. Butler, 112 Wn.2d 193,200-01,770 P.2d 

1027 (1989). Of the many issues raised in the parties' briefs on appeal, we find two to be 

dispositive. 

First, it was foreseeable and is undisputed that the AAA would decline to 

administer the parties' dispute as a consumer arbitration, in which event its Consumer 

Arbitration Rules permit the estate to pursue its claims in court. Under the 

7 

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I No. 32880-5-111 

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I Woodward v. Emeritus Corp. 

I 

circumstances, an order compelling arbitration would be futile. Second, and 

alternatively, we find the agreement to arbitrate to be substantively unconscionable given 

the nature of the estate's claims. 

We begin with an overview ofthe Consumer Arbitration Rules and the parties' 

agreement, next address applicable federal and state law including the standard of review, 

I 
 and then tum to the two alternative bases on which we affirm the trial court. 


I. The AAA Consumer Arbitration Rules and the Parties' Agreement 

I The provision of the parties' arbitration agreement that governs the procedure to 


I 
 be followed in arbitrating any dispute states in its entirety: 


Arbitration Procedure. Arbitrations shall be administered in accordance 

with the procedures in effect for consumer arbitration adopted by the 

American Arbitration Association. Arbitrations shall be conducted by a 

single arbitrator agreed to by the Parties. If the Parties cannot agree upon 

an arbitrator, each Party shall select a nominator, who must be engaged in 

the practice ofprofessional arbitration. The two nominators shall appoint a 

third arbitrator who will act as the single arbitrator. 

Arbitrations will be held at an agreed upon location, or in the absence of 

such agreement, at the Community. The dispute will be governed by the 

laws of the state in which the Community is located. The arbitrator's fee 

shall be shared equally by the Parties. Each Party shall be responsible for 

its own legal fees. Any award by the arbitrator may be entered as a 

judgment in any court having jurisdiction. 

CP at 45-46. 

Emeritus moved to compel arbitration in October 2014. At that time, the 

"procedures in effect for consumer arbitration adopted by the American Arbitration 

8 

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I No. 32880-5-III 

Woodward v. Emeritus Corp. 

Association" were the AAA's Consumer Arbitration Rules ("the Rules") as amended and 

effective September 1,2014. CP at 45,231-37. Since the parties filed only partial copies 

ofthe Rules, we rely hereafter on the complete set of the Rules available at https:llwww. 

adr.org/aaalShowProperty?nodeId=/UCM/ADRSTAGE2021425&revision=latestreleased 

(last visited on January 14,2016). 

The first ofthe Rules, R-l, governs when they will be applied by the AAA. At 

R-l(a), (3) and (4), the Rules provide that ifthe parties have entered into a "consumer 

agreement" within the meaning ofthe Rules, the AAA will treat the Rules as a part of 

their arbitration agreement when the parties have provided for arbitration by the AAA 

and either did not specify a particular set ofrules or specified a different set of rules. In 

making an independent determination of which of its rules should apply to a dispute, the 

AAA applies the Rules only to disputes arising under a "consumer agreement," which the 

Rules define as 

an agreement between an individual consumer and a business where the 

business has a standardized, systematic application of arbitration clauses 

with customers and where the terms and conditions ofthe purchase of 

standardized, consumable goods or services are non-negotiable or primarily 

non-negotiable in most or all of its terms, conditions, features, or choices. 

The product or service must be for personal or household use. 

R-l at 9. The Rules list the following contracts as examples of agreements that typically 

meet the criteria for a consumer agreement: credit card agreements, telecommunications 

agreements, leases; automobile and manufactured home purchases, finance agreements; 

9 

No. 32880-5-111 


Woodward v. Emeritus Corp. 


home inspection contracts, pest control services; moving and storage contracts, 

warranties~ legal funding, health and fitness club membership agreements~ travel services, 

insurance policies, and private school enrollment agreements. R-l at 9-10. 

I Examples of contracts that "typically do not meet the criteria for application of 

these Rules~ should the contract contain an arbitration provision, include, but are not I 

1 

I limited to": home construction and remodeling contracts, real estate purchase and sale 

I agreements, condominium or homeowner association by-laws, business insurance 

I policies, commercial loan and lease agreements, and commercial guaranty agreements. 

I 

~ R-I at 10. I 

I Emeritus does not contend that a contract under which it provides assisted living 

services to an elderly patient under an individualized personal care plan falls within the 

I AAA's definition ofa "consumer agreement." But it points out that just because the 

I AAA might not view an agreement as a "consumer agreement" within the meaning of the ! 

Rules does not mean that parties cannot select the Rules as those that will govern 

arbitration of future disputes under a different sort of agreement. R-I(a) provides that: 

The parties shall have made these Consumer Arbitration Rules ("Rules") a 

part of their arbitration agreement whenever they have provided for 

arbitration by the American Arbitration Association ("AAA"), and 

1) have specified that these Consumer Arbitration Rules shall apply. 

R-l(a) at 9 (alterations in original). '" If the parties to a contract clearly and 

unequivocally incorporate by reference into their contract some other document, that 

10 

No. 32880-5-III 


Woodward v. Emeritus Corp. 


document becomes part of their contract.'" Nail v. Consolo Res. Health Care Fund I, 155 

Wn. App. 227, 232, 229 P.3d 885 (2010) (quoting Satomi Owners Ass 'n V. Satomi, LLC, 

167 Wn.2d 781,801,225 P.3d 213 (2009)). The parties' agreement in this case 

effectively incorporates the Rules by reference, thereby making them a part of the parties' 

contract. Whether the estate can successfully resist enforcement of the parties' contract 

on the basis of substantive unconscionability is a different issue, which we address later 

in the opinion. 

The Rules presumptively provide for extremely limited discovery: "If any party 

asks or if the arbitrator decides on his or her own ... the arbitrator may direct (1) specific 

documents and other information to be shared between the consumer and business, and 

(2) that the consumer and business identify the witnesses, if any, they plan to have testify 

at the hearing." R-22(a) at 20. Exhibits are required to be shared between the parties at 

least five business days before the hearing, unless the arbitrator sets a different exchange 

date. R-22(b) at 20. Otherwise, R-22(c) provides: 

No other exchange of information beyond what is provided for in section 

(a) above is contemplated under these Rules, unless an arbitrator 


determines further information exchange is needed to provide for a 


fundamentally fair process. 


R-22(c) at 20. This provision is subject to the general command of the rule that the 

arbitrator "keep[] in mind that arbitration must remain a fast and economical process." 

R-22(a) at 20. 

11 

No. 32880-S-II1 

Woodward v. Emeritus Corp. 

The Rules limit motion practice. Dispositive motions may be filed only if the 

arbitrator determines that the moving party has shown substantial cause that the motion is 

likely to succeed. R-33 at 2S. Nondispositive motions may only be filed with the 

arbitrator's permission after the party first presents the issue in a conference call. R-24 

at 2l. The hearing of the arbitration "generally will not exceed one day," with an 

exception if "good cause" is shown. R-32(d) at 24. 

Unlike other commonly used rules promulgated by the AAA that compensate 

arbitrators at their stated rates, the Rules dictate an arbitrator compensation rate of $1 ,SOO 

per day. Compare R-S(a) at 14 ("[a]rbitrators serving under these Rules shall be 

compensated at a rate established by the AAA") and Rules at 34 (Costs of Arbitration, 

establishing $1,SOO per day as the rate) with the AAA's Commercial Arbitration Rules 

and Mediation Procedures,4 R-SS(a) at 30 (an arbitrator shall be compensated at a rate 

consistent with his or her stated rate of compensation); the AAA's Construction Industry 

Arbitration Rules and Mediation Procedures,S R-S7(a) at 36 (same); the AAA's 

4 https:llwww.adr.org/aaalShowProperty?nodeId=IUCMlADRSTG_ 004103& 

revision=latestreleased (rules amended and effective October 1,2013) (last visited Jan. 

14,2016). 

5 https:llwww.adr.org/aaalShowProperty?nodeId=IUCMlADRSTG_004219& 

revision=latestreleased (rules amended and effective July 1, 20 IS) (last visited Jan. 14, 

2016). 

12 

No. 32880-5-III 


Woodward v. Emeritus Corp. 


Employment Arbitration Rules and Mediation Procedure,6 Rule 44 at 30 (an arbitrator 

shall charge a rate consistent with his or her stated rate of compensation, subject to AAA 

involvement in setting an appropriate rate in the event of disagreement); and the AAA 

Labor Arbitration Rules,7 Arbitrator Compensation provision, at 20 (arbitrator 

compensation shall be in accordance with the fee structure disclosed in the arbitrator's 

profile). 

Apparently to safeguard against misuse of the simplified, expedited, and thereby 

inexpensive procedure for consumer disputes that they make available, the Rules 

explicitly provide that the AAA will administer a consumer dispute only if "the AAA 

reviews the parties' arbitration agreement and ifthe AAA determines the agreement 

substantially and materially complies with the due process standards ofthese Rules and 

the Consumer Due Process Protocol." R-l(d) at 10 (alteration in original). If, upon 

review, a business's agreement does not meet those standards, "either party may choose 

to submit its dispute to the appropriate court for resolution." ld. 

It is unclear which of the Rules the AAA views as creating material due process 

standards. But Emeritus's agreement modifies the Rules in only two respects that we 

6 https://www.adr.org/aaaJShowProperty?nodeId=IUCMlADRSTG _ 004362& 

revision=latestreleased (rules amended and effective November 1,2009; fee schedule 

amended and effective Jan.I, 2016) (last visited Jan. 14,2016). 

7 https://www.adr.org/aaaJShowProperty?nodeId=IUCMlADRST AGE20 12805& 

revision=latestreleased (rules amended and effective July 1,2013; fee schedule amended 

and effective March 15,2015) (last visited Jan. 14,2016). 

13 

No. 32880-5-III 


Woodward v. Emeritus Corp. 


believe the AAA might view as having material implications. First, under the Rules, the 

business is to bear all of the costs of arbitration (filing fee, hearing fee, and arbitrator 

compensation) unless the consumer initiates the arbitration, in which case the consumer 

is responsible for only a $200 filing fee. R-4 and R-5(c) at 13-14 (both incorporating the 

"Costs of Arbitration" section beginning on page 33 of the Rules). Emeritus's 

agreement, by contrast, provides that "[t]he arbitrator's fee shall be shared equally by the 

Parties." CP at 46. 8 

Second, under the Rules, "[t]he arbitrator may grant any remedy, relief, or 

outcome that the parties could have received in court, including awards of attorney's fees 

and costs, in accordance with the law(s) that applies to the case." R-44(a) at 28. In the 

case of the estate's vulnerable adult claim, that could include recovery of its attorney fees 

and costs. RCW 74.34.200(3). Emeritus's agreement, by contrast, provides, "Each party 

shall be responsible for its own legal fees." CP at 46. 

It is also unclear which provisions of the Consumer Due Process Protocol the 

AAA would regard as creating material standards in determining whether it will 

administer a consumer arbitration. Among those that we believe might be of concern in 

this case are the requirement of Principle 2 of the protocol that 

8 The estate has abandoned any argument on appeal that the arbitrator fee-sharing 

term is substantively unconscionable. 

14 

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I No. 32880-5-III 

Woodward v. Emeritus Corp. t 

I 

I 

1 

[p ]roviders of goods or services should undertake reasonable 

measures to provide Consumers with full and accurate information 

regarding Consumer ADR Programs. At the time the Consumer contracts 

I 

for goods or services, such measures should include ... reasonable means 

by which Consumers may obtain additional information regarding the ADR 

Program. 

CP at 329. A related requirement of Principle 11 of the protocol provides: 

J 


I Consumers should be given: 


I 

a. clear and adequate notice of the arbitration provision and its I consequences, including a statement of its mandatory or 

optional character; [and] 

I 

b. reasonable access to information regarding the arbitration 

process, including basic distinctions between arbitration and 

court proceedings, related costs, and advice as to where they 

may obtain more complete information regarding arbitration 

procedures and arbitrator rosters. 

CP at 331. 

Finally, the AAA has a longstanding policy, adopted in 2003 and grounded in due 

process concerns, that it will not administer healthcare arbitrations between individual 

patients and healthcare service providers that relate to medical services, such as 

negligence and medical malpractice disputes, unless all parties agree to submit the matter 

to arbitration after the dispute arises. See AAA Healthcare Policy Statement, 9 The 

policy is reflected in the AAA's Healthcare Due Process Protocol (Final Report July 27, 

9 https:llwww.adr.orglcs/idcplg?IdcService=GET_FILE&dDocName= ADR 

STAGE2024674&RevisionSelectionMethod=LatestReleased (last visited Jan. 15,2016). 

15 

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I No. 32880-5-III 


Woodward v. Emeritus Corp. 


I 1998),10 which was developed in conjunction with the American Bar Association, the I 

I 
 American Medical Association, and the Commission on Health Care Dispute Resolution. 


I 
 It contains those entities' unanimous recommendation that "[i]n disputes involving 


patients, binding forms of dispute resolution should be used only where the parties agree f 

I 
 to do so after a dispute arises." Protocol at I. 


While we lack the particular criteria applied by the AAA in conducting its due 


I process review, the procedure that it follows is clearly set forth in the Rules. R-l (d) 


I provides: 


The AAA will accept cases after the AAA reviews the parties' arbitration 


agreement and if the AAA determines the agreement substantially and 

materially complies with the due process standards of these Rules and the 

Consumer Due Process Protocol. 

R-l(d) at 10 (alteration in original). 

R-12 provides a process for advance review of arbitration provisions in consumer 

agreements. If a business's arbitration provision is approved through the advance review 

process, the business will be included in a publicly accessible Consumer Clause Registry 

as a business whose consumer disputes the AAA will administer. If a business has not 

10 https:llwww.adr.orglcs/idcplg?IdcService=GET _FILE&dDocName= 

ADRSTAGE2025859&RevisionSelectionMethod=LatestReleased (final report July 27, 

1998) (last visited Jan. 15, 2016). 

16 
No. 32880-5-111 


Woodward v. Emeritus Corp. 


obtained advance review and a consumer arbitration is then filed with the AAA, the 

Rules provide that 

the AAA will conduct an expedited review at that time. Along with any 

other filing fees that are owed for that case, the business also will be 

responsible for paying the nonrefundable review and Registry fee 

(including any fee for expedited review at the time of filing) for this initial 

review, which is detailed in the Costs of Arbitration section found at the 

end of these Rules. The AAA will decline to administer consumer 

arbitrations arising out of that arbitration agreement if the business declines 

to pay the review and Registry fee. 

R-12 at 16. 

II. Applicable Law and Standard ofReview 

Under the Federal Arbitration Act (FAA), 9 U.S.c. §§ 1-16,11 arbitration 

agreements are "valid, irrevocable, and enforceable, save upon such grounds as exist at 

law or in equity for the revocation of any contract." 9 U.S.c. § 2. Washington's 

arbitration law contains a nearly identical provision. See also RCW 7.04A.060(l) ("An 

agreement contained in a record to submit to arbitration any existing or subsequent 

controversy arising between the parties to the agreement is valid, enforceable, and 

irrevocable except upon a ground that exists at law or in equity for the revocation of 

contract."). "[B]oth state and federal law strongly favor arbitration and require all 

11 The parties' arbitration agreement provides that it "shall be governed by and 

interpreted under the [FAA]." CP at 46. It provides that "the dispute will be governed by 

the laws ofthe state in which [Emeritus at Richland Gardens] is located." ld. (emphasis 

added). 

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No. 32880-5-111 


Woodward v. Emeritus Corp. 


presumptions to be made in favor of arbitration." Gandee v. LDL Freedom Enters., Inc., 

176 Wn.2d 598, 603, 293 P.3d 1197 (2013) (citing Zuver v. Airtouch Commc 'ns, Inc., 

153 Wn.2d 293,301, 103 P.3d 753 (2004». 

"Although federal and state courts presume arbitrability, 'generally applicable 

I contract defenses, such as fraud, duress, or unconscionability may be applied to 

I 

I 

invalidate arbitration agreements without contravening [9 U.S.C.] § 2. ", Adler v. Fred 

Lind Manor, 153 Wn.2d 331, 342,103 P.3d 773 (2004) (quoting Doctor 's Assocs., Inc. v. 

Casarotto, 517 U.S. 681,687,116 S. Ct. 1652, 134 L. Ed. 2d 902 (1996». In 

Washington, either substantive or procedural unconscionability is sufficient to invalidate 

acontract. Gandee, 176 Wn.2dat603 (citing Adler, 153 Wn.2dat347). 

'" Substantive unconscionability involves those cases where a clause or term in the 

contract is alleged to be one-sided or overly harsh.'" Zuver, 153 Wn.2d at 303 (quoting 

Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256,260,544 P.2d 20 (1975»; Torgerson v. 

One Lincoln Tower, LLC, 166 Wn.2d 510,519,210 P.3d 318 (2009). "Procedural 

unconscionability is 'the lack of a meaningful choice, considering all the circumstances 

surrounding the transaction including [t]he manner in which the contract was entered, 

whether the party had a reasonable opportunity to understand the terms of the contract, 

and whether the important terms [were] hidden in a maze of fine print.'" Adler, 153 

Wn.2d at 345 (alterations in original) (internal quotation marks omitted) (quoting Nelson 

v. McGoldrick, 127 Wn.2d 124,131,896 P.2d 1258 (1995». 

18 

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i No. 32880-5-III 

Woodward v. Emeritus Corp. i 

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I "Severance is the usual remedy for substantively unconscionable terms, but where 

such terms 'pervade' an arbitration agreement, [this court] 'refuse[s] to sever those 

provisions and declare[s] the entire agreement void.'" Gandee, 176 Wn.2d at 603 

I (quoting Adler, 153 Wn.2d at 358). Stated differently, when severance will "significantly 

alter both the tone of the arbitration clause and the nature of the arbitration contemplated 

I 
 by the clause," the appropriate remedy is to invalidate the entire agreement. Id. at 607. 


When a motion to compel arbitration is not resolved by trial and fact finding by 

the court, the appropriate standard of review is de novo. Neuson v. Macy's Dep 't Stores, 

Inc., 160 Wn. App. 786, 792-93, 249 PJd 1054 (2011). The party opposing arbitration 

bears the burden of showing that the agreement is not enforceable. Gandee, 176 Wn.2d 

at 602-03. 12 

12 The estate asks us to construe the trial court's ruling as based in part on implicit 

fact-finding. It argues that in resisting its motion for an evidentiary hearing, Emeritus 

conceded Scott's version ofthe circumstances under which the arbitration agreement was 

signed or, in any event, invited the court to make factual findings on the basis of the 

parties'declarations. It argues the court's ruling reflects an implicit finding of procedural 

unconscionability that we should review for substantial evidence in the written 

submissions. 

We reject the estate's characterization' of Emeritus's position in the trial court. 

Emeritus argued that because Scott could not justifiably rely on Ms. Ross's alleged 

representation as a matter oflaw, no evidentiary hearing was necessary. There is no 

indication that the trial court engaged in fact finding in denying the motion to compel 

arbitration nor would it have been proper for it to resolve disputed material facts on the 

basis of declarations. Inany event, since we do not base our decision on the estate's 

argument of fraud in the execution, the dispute proves to be moot. 

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No. 32880-5-III 


Woodward v. Emeritus Corp. 


III. The Trial Court Properly Refused to Compel Arbitration 

A. Futility i 

i In the trial court and on appeal, the estate has argued that in applying the Rules, 

I the AAA or the arbitrator will necessarily decline to administer arbitration of its dispute 

with Emeritus and will permit it to pursue its claims in court. It contends that for us to 

reverse the trial court and compel arbitration will be futile. Br. of Resp't at 43. For its 

part, Emeritus concedes that the AAA will be "prevent[ ed]" from administering the 

parties' arbitration by the 2003 Healthcare Policy Statement. Reply Br. at 15. At oral 

argument, Emeritus's counsel reported that it has not yet submitted a demand for 

arbitration to the AAA.13 

According to Emeritus, the AAA's foreseeable refusal to administer an arbitration 

under the parties' agreement is not an obstacle to arbitration, because "the Agreement 

requires that the arbitration be administered 'in accordance with' AAA's rules-not that 

it be administered by AAA." Id. According to Emeritus, "this Court and numerous other 

courts have held that the inability of AAA to administer health care disputes will not 

invalidate an arbitration agreement nor will it preclude the parties' chosen arbitrator from 

using AAA's rules." Id. 

13 Wash. Court of Appeals oral argument, Woodwardv. Emeritus Corp., No. 

32880-5-III (Sept. 10, 2015) at 21 min., 7 sec. through 21 min., 20 sec. (on file with the 

court). 

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No. 32880-5-111 

Woodward v. Emeritus Corp. 

There are two facets to Emeritus's argument that the AAA need not administer the 

arbitration: an argument that AAA administration is not required by the parties' 

agreement, and an argument that if an agreed administration fails, the courts have 

statutory authority to substitute another process. 

We address the contract-based argument first. Emeritus relies on Gandee, in 

which a debt adjustment business, LDL, sought to enforce an arbitration agreement that 

provided, '" All disputes or claims between the parties related to this Agreement shall be 

submitted to binding arbitration in accordance with the rules of [the] American 

Arbitration Association within 30 days from the dispute date or claim.'" 176 Wn.2d at 

602 (alteration in original). In response to the consumer's argument that the arbitration 

agreement was substantively unconscionable based on the cost of arbitrating through the 

AAA, LDL argued that its clause "does not require arbitration with the AAA but only 

that the rules of the AAA be followed." Id. at 605. While the court responded, "This 

assertion appears correct," it then quickly rejected LDL's attempted rebuttal of the 

consumer's evidence, since LDL failed to present any evidence of the cost of an 

alternative forum. Id. 

The statement, "This assertion appears correct," is dicta. It addressed an assertion 

that was notdisputed in the Supreme Court and that bore on an argument that was easily 

rejected on other grounds. The court did not engage in any examination of whichever 

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Woodward v. Emeritus Corp. 

AAA rules applied. There is also no suggestion that the case involved the Rules at issue 

in this case. 

Provisions of the Rules directly contradict Emeritus's argument that the parties' 

dispute need not be administered by the AAA. R-l(b) provides that "[w]hen parties 

agree to arbitrate under these Rules, or when they provide for arbitration by the AAA and 

an arbitration is initiated under these Rules, they thereby authorize the AAA to administer 

the arbitration." (Emphasis added.) While the Rules provide that the consumer and the 

business may agree to change the Rules, "they must agree in writing." R-l(c) at 10. 

Nothing in Emeritus's agreement changes the AAA's authorized administration ofthe 

arbitration under R-1(c) by withholding administration authority from the AAA. 

The parties' agreement does not provide for administration by someone other than 

the AAA. When asked at oral argument of the appeal who would be the administrator if 

not the AAA, Emeritus's counsel suggested that the arbitrator could serve as the 

administrator. 14 But the parties' agreement says nothing that amounts to "the arbitrator 

shall also serve as administrator." Under the Rules, the "administrator" and the 

"arbitrator" are distinct and have different responsibilities. The Glossary of Terms 

appearing at the end of the Rules define them separately, providing, in part, that "[t]he 

14 Wash. Court ofAppeals oral argument, Woodward v. Emeritus Corp., No. 

32880-5-III (Sept. 10,2015) at 28 min., 21 sec. through 29 min., 00 sec (on file with the 

court). 

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Woodward v. Emeritus Corp. 


Administrator's role is to manage the administrative aspects of the arbitration," while 

arbitrators "are neutral and independent decision makers who are not employees of the 

administrator." Rules at 39-:-40. Emeritus is the author of the agreement, which, if 

ambiguous, must be construed against it. Mendez v. Palm Harbor Homes, Inc., III Wn. 

App. 446, 459, 45 P.3d 594 (2002). To contend that the arbitrator will serve as both 

arbitrator and administrator is to read something into the agreement for which there is no 

textual support whatsoever. The AAA is the only administrator contemplated by the 

parties' agreement and its incorporated Rules. 

And whoever serves as administrator, the parties' arbitration will not be 

"administered in accordance with the procedures in effect for consumer arbitration 

adopted by the [AAA]," CP at 45, unless that administrator reviews whether Emeritus's 

arbitration agreement substantially and materially complies with the due process 

standards of the Rules and the Consumer Due Process Protocol-failing which, 

administration under the Rules should be declined and the parties should be permitted to 

submit the dispute to court. R-I(d) at 10. The parties' agreement does not waive due 

process review. Again, to change the Rules' requirement for due process review, the 

"[parties] must agree in writing." R-l(c) at 10. 

F or the second facet of its argument-that if the AAA declines to administer, the 

court may substitute another administrator-Emeritus relies on Nail, 155 Wn. App. 227. 

The parties in that case had agreed that their arbitrators "shall apply the applicable rules 

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No. 32880-5-III 


Woodward v. Emeritus Corp. 


ofprocedure of the AAA." Id. at 230. It is evident that Nail did not involve the AAA's 

consumer rules. IS This court held that under the agreement at issue in that case, "the 

method of choosing arbitrators was specified," but "the agreement did not require 

exclusive AAA administration." Id. at 230. Because the method of selecting arbitrators 

failed, the court applied RCW 7.04A.110(1), which authorizes a court to appoint a 

substitute arbitrator when the appointed arbitrator fails or is unable to act. 16 

This case is distinguishable because the Rules incorporated in the agreement 

between Emeritus and the estate (and thereby a part of their agreement) dictate a different 

result. In promulgating the Rules, which create a simplified, expedient, and inexpensive 

process for the resolution of consumer disputes, the AAA included a process by which it 

could protect consumers from being subjected to unsuitable rules where an agreement 

substantially and materially violated its due process standards. And it explicitly provided 

what would happen if it found a due process-offending agreement to arbitrate: 

IS The decision states that the parties' agreement "did not require exclusive AAA 

administration," whereas the Rules do; the decision also states, "Notably, AAA did not 

legislate its policy statement into a specified rule ofprocedure, whereas the AAA did 

legislate a due process review process into the Rules. Nail, 155 Wn. App. at 234; 

compare R-l(b) at 10 (authorizing the AAA to administer the arbitration) and R-l(d) at 

10 (providing for AAA's due process review). 

16 Also at issue in Nail was whether the AAA's 2003 Healthcare Policy Statement 

was a "rule ofprocedure" of the AAA, such that the arbitrators would be bound to apply 

it and reject any arbitration agreement that was not a postdispute arbitration agreement. 

This court held that the policy statement was not a "rule ofprocedure." Id. at 234. 

24 

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No. 32880-5-III I 

i Woodward v. Emeritus Corp. 

I 

I Should the AAA decline to administer an arbitration, either party may 

choose to submit its dispute to the appropriate court for resolution. 

I R-l(d) at 10 (emphasis added). This is not an instance in which the arbitration method 

I failed, leaving the parties without any agreed substitute process for resolving their 

I 

I dispute. This is an instance in which the Rules expressly provide that if the AAA i 

I concludes that arbitration will not afford due process, then either party is free to litigate. 


I Where freedom to litigate was the agreed alternative, the trial court properly denied the 


motion to compel arbitration. 


B. Substantive unconscionability 
 I Alternatively, we hold that the agreement is substantively unconscionable as 


applied to the estate's negligence and vulnerable adult claims. When arbitration is 


resisted on the basis of unconscionability, '" [t]he existence of an unconscionable bargain 


is a question of law for the courts.'" Mendez, 111 Wn. App. at 458 (quoting Nelson, 127 


Wn.2d at 131). It is an issue that courts approach both in law and equity, exercising the 


power to prevent enforcement of a legal right when to do so would be inequitable under 


the circumstances. ld. at 460 (citing Thisius v. Sealander, 26 Wn.2d 810, 818, 175 P.2d 


619 (1946)). 


First, the arbitration agreement provides that, "[ e ]ach party shall be responsible for 

. its own legal fees." CP at 46. Washington cases hold that such a provision is 

substantively unconscionable when it effectively undermines a plaintiffs statutory 

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Woodward v. Emeritus Corp. I 

I 

I entitlement to an award of attorney fees. Adler, 153 Wn.2d at 355. It would effectively 

I undercut the estate's right to attorney fees ifit prevails on its claim asserted under RCW 

74.34.200(3). Emeritus does not explicitly concede that the attorney fees term is i 

~ 

I unconscionable, but it suggests that it should be severed. 


I Second, while the parties were free to contract for arbitration under the Rules, the 


I Rules are inherently unsuited to the nature and complexity of the estate's claims. 

I Emeritus cites Gilmer v. Interstate/Johnson Lane Corp., in which the Supreme Court 

! observed that "by agreeing to arbitrate, a party 'trades the procedures and opportunity for 

review of the courtroom for the simplicity, informality, and expedition of arbitration.'" 

500 U.S. 20, 31, IllS. Ct. 1647, 114 L. Ed. 2d 26 (1991) (quoting Mitsubishi Motors 

Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628, 105 S. Ct. 3346, 87 L. Ed. 2d 

444 (1985)). But while some arbitral limitations on the procedures and opportunities that 

would be available in "the courtroom" are to be expected and do not result in an 

agreement that is overly harsh, others can-and the Rules, as applied to healthcare 

personal injury claims, do. 

The Rules were designed for simple business disputes: they presume that the 

arbitration will be completed in one day, that the only discovery to be ordered will be 

specific documents and information directed by the arbitrator along with witness 

identification, and that it will be sufficient for the parties to exchange exhibits five days 

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I No. 32880-5-III 


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i before the hearing. They cap the arbitrator's compensation at $1,500 per day-for an I 

eight hour hearing day, that is less than $200 per hour. 

The estate supported its argument that these procedures were inappropriate with 

two declarations, the first being that of Lesley Ann Clement, a California lawyer who 

prepared the declaration in support of an award of fees and costs against Emeritus in an 

unrelated action. While much of her declaration is irrelevant, it does establish her 

considerable experience with elder abuse litigation and describes relevant discovery 

needs when pursuing claims such as the estate's: 

[I]t is crucial to uncover the "why" of the neglect-that is, the underlying 

factors and policies that led to the client's injury and/or death. This 

requires multiple rounds of written discovery and depositions (necessitating 

motions to compel) to investigate the facility's staffing, training, 

supervision, and budgeting, among other things .... [T]here is often 

extremely high turnover among care giving staff at long-term care facilities. 

Learning details about the facility's operations during the client's stay is 

not a simple matter of serving deposition notices; rather, former staff must 

be located, interviewed and/or subpoenaed. 

CP at 339. It also asserts that in Ms. Clement's litigation against Emeritus, "Plaintiffs 

were forced to file at least fourteen successful motions to compel, and were awarded 

more than $16,000 in sanctions." CP at 341. While this does not suggest that Emeritus 

would resist reasonable discovery in this Washington dispute nor reflect in any way on its 

Washington lawyers, it is evidence that a California court recognized that the opportunity 

for adequate discovery is important in an elder abuse action. 

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I No. 32880-5-III I Woodward v. Emeritus Corp. 

The estate also submitted the declaration of a Kennewick lawyer, Francois 

Forgette, who had "regularly served as a mediator or arbitrator in civil disputes since 

approximately 1995." CP at 381. He testified that his stated rate as an arbitrator is $325 

to $350 per hour, and expressed the opinion, based on his experience as an arbitrator in 

the Tri-Cities and the Central Washington region, that 

the proposal of a flat arbitrator's fee of $1 ,500 per day ... is likely 

unreasonable and is less likely to result in the selection of a mutually 

agreeable and qualified arbitrator. This would particularly hold true where 

the case at issue is neither routine, nor simple. The flat fee arrangement 

described appears only suitable for small collection or other such civil 

disputes. An experienced and qualified arbitrator is unlikely to consent to 

such a flat fee arrangement if the matter is likely complex, will require 

extended prep or a long hearing, or will take careful consideration to 

complete and draft the decision. 

CP at 381. 

Emeritus's response is that the arbitrator can reject the presumptions about the 

amount of discovery and the length of the hearing and even 'jettison [the] rules 

altogether." Br. ofAppellant at 15 (citing Rule R-l (e) at 11, under which, if the AAA 

makes the decision to apply the consumer rules, either party may object, and "the 

arbitrator shall have the authority to make the final decision on which AAA rules wili 

apply"). But the fact remains that the Rules to which the parties agreed, and the 

presumptions and standards that the Rules provide-that the process remain "fast and 

economical," R-22 at 20; that more than minimal discovery be ordered only if "needed to 

provide a fundamentally fair process," R-22(c) at 20; and that a hearing extend beyond a 

28 

No. 32880-5-III 


Woodward v. Emeritus Corp. 


day only for "good cause," R-32( d) at 24~are unsuitable for the types of claims asserted 

by the estate, as the AAA itself recognizes. And it is not enough to argue, as Emeritus 

does, that it will be equally disadvantaged by the limitations of the Rules. It is 

foreseeable that most ofthe relevant evidence is in the possession ofEmeritus and its 

present and past employees, not the estate. And the estate bears the burden ofproof. 

Emeritus also argues that the $1,500 daily fee for the arbitrator only "applies to 

AAA-administered arbitrations, for arbitrators appointed from AAA's National Roster." 

Reply Br. at 15. Nothing in the parties' agreement or the Rules supports that assertion. 

The Rules contemplate arbitrators might or might not be appointed from the AAA's 

national roster-they allow parties to identifY their own arbitrator or agree on a process 

for identifYing an arbitrator that does not rely on the roster. R-16(a) at 18. Whether the 

arbitrators are appointed from the AAA's national roster or not, the Rules provide that 

"[a]rbitrators serving under these Rules shall be compensated at a rate established by the 

AAA" and "be paid in accordance with the Costs of Arbitration section found at the end 

of these Rules." R-5(a), (c) at 14. The Costs ofArbitration section provides at its 

paragraph (ii) at 34, "Arbitrators serving on a case with an in-person or telephonic 

hearing will receive compensation at a rate of $1500 per day." No distinction is made in 

any of these provisions between national roster arbitrators or privately-selected 

arbitrators. Nowhere do the rules provide that an arbitrator can be paid at his or her 

stated rate. 

29 
No. 32880-5-III 


Woodward v. Emeritus Corp. 


Considering all, it is understandable why the AAA reserved the authority under 

the Rules to decline administration and leave the parties to litigate. Inappropriate terms 

pervade the Rules as applied to the estate's claims, in addition to the substantively 

unconscionable attorney fee's provision. For this additional reason, arbitration should 

not be compelled. 

Affirmed. 

WE CONCUR: 

. B 

~~~ wn,1. ICJ 

j 


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