Opinion ID: 901638
Heading Depth: 1
Heading Rank: 10

Heading: Enforcement of an Adhesion Contract

Text: [¶ 24.] Patients pleaded that the Hospitals did not provide an opportunity for negotiating the agreements and that there was greatly disparate and wholly unequal bargaining power. They further pleaded that such standardized contracts are contracts of adhesion that are unconscionable and contrary to public policy. See generally Citibank (S.D.), N.A. v. Hauff, 2003 SD 99, ¶ 20, 668 N.W.2d 528, 534-535 (describing construction of a contract of adhesion); Mobile Electronic Service, Inc., v. FirsTel, Inc., 2002 SD 87, ¶¶ 7-9, 649 N.W.2d 603, 605-606 (finding a contract unconscionable and unenforceable). [¶ 25.] In determining whether a contract is an unenforceable contract of adhesion, this Court looks not only at the bargaining power between the parties but also at the specific terms of the agreement. Scotland Vet Supply v. ABA Recovery Service, Inc., 1998 SD 103, ¶ 13, 583 N.W.2d 834, 837. Thus, we focus on both overly harsh or one-sided terms, i.e., substantive unconscionability; and how the contract was made (which includes whether there was a meaningful choice), i.e., procedural unconscionability. Johnson v. John Deere Company, 306 N.W.2d 231, 237 (S.D.1981) (citation omitted). [¶ 26.] Patients' complaints pleaded both procedural and substantive unconscionability. They allege that they were forced to sign the standardized agreements before they could receive medical care and that there was unequal bargaining power. Their complaints also allege that the contracts required them to pay pre-set charges that were determined at the sole discretion of the Hospitals. [¶ 27.] Patients sought two types of relief. They alleged that the Hospitals' use of an adhesion contract caused them economic injury and damages. They also alleged that the contracts were unenforceable. [¶ 28.] To the extent that Patients claimed entitlement to economic damages simply because they entered into a contract of adhesion, the complaints failed to state a claim upon which relief can be granted. Counsel acknowledged at oral argument that the nature of an adhesion claim does not give rise to an independent cause of action for damages. [8] [¶ 29.] But even aside from this acknowledgement, and assuming that the contract was an unconscionable contract of adhesion, Patients have no right to recover damages simply because they entered into an unconscionable contract. As the Eleventh Circuit Court of Appeals noted: [T]he equitable theory of unconscionability has never been utilized to allow for the affirmative recovery of money damages. The Court finds that neither the common law of Florida, nor that of any other state, empowers a court addressing allegations of unconscionability to do more than refuse enforcement of the unconscionable section or sections of the contract so as to avoid an unconscionable result. Cowin Equip. Co., Inc., v. General Motors Corp., 734 F.2d 1581, 1582 (11th Cir.1984) (emphasis in original) (quoting Bennett v. Behring Corp., 466 F.Supp. 689, 700 (S.D.Fla.1979)). Other cases [that] have addressed the issue have consistently rejected the theory that damages may be collected for an unconscionable contract provision, citing the language of [UCC] § 2-302 and its common law precursor. . . . Id. The doctrine of unconscionability is to be used as a shield, not a sword, and may not be used as a basis for affirmative recovery. Super Glue Corp., v. Avis Rent A Car Sys., Inc., 132 A.D.2d 604, 606, 517 N.Y.S.2d 764 (N.Y.App.Div.1987). Under both the UCC and common law, a court is empowered to do no more than refuse enforcement of the unconscionable contract or clause. Id. (citations omitted). This Court has also noted that the doctrine is a defensive mechanism that enables parties to escape their obligations under contracts contravening public policy. Bartron v. Codington County, 68 S.D. 309, 323, 2 N.W.2d 337, 344 (1942) (quoting Baltimore and Ohio Southwestern Railway Co. v. Voigt, 176 U.S. 498, 505, 20 S.Ct. 385, 387, 44 L.Ed. 560 (1900)). `Adhesive clauses, exacted by the overreaching of a contracting party who is in an unfairly superior bargaining position, are always subject to the defense of unconscionableness. Public policy invalidates such clauses.' 8 Samuel Williston and Richard A. Lord, A Treatise on the Law of Contracts, § 18:5 at 28 (4th ed 1998) (emphasis added) (quoting Fluor Western, Inc. v. G & H Offshore Towing Co., 447 F.2d 35 (5th Cir.1971)). [¶ 30.] Patients have not, however, directed us to any case permitting an affirmative claim for damages simply because someone may have entered into a one-sided agreement. Therefore, we affirm the circuit courts' dismissal of Patients' affirmative adhesion contract claims that are being used as a sword to recover damages only because Patients entered into the contracts. We also affirm the dismissal of any defensive claims because in these cases there are no pleadings indicating that Hospitals are suing for enforcement of the contracts. [9]