Court Opinion

ID: 3175932
Source: CourtListenerOpinion
Date Created: 2016-02-09 17:36:03.968391+00
Date Added: 2024-06-11T14:28:47.939713
License: Public Domain

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 of the ESTATE OF              )         No. 32880-5-III
VIRGINIA MAY WOODWARD, SCOTT                 )
WOODWARD, in his individual capacity,        )
and CHRISTINE WOODWARD, in her               )
individual capacity,                         )
                                             )         PUBLISHED OPINION
                     Respondents,            )
                                             )
       v.                                    )
                                             )
EMERITUS CORPORATION, a                      )

Washington corporation, BROOKDALE            )

SENIOR LIVING COMMUNITIES,                   )

INC., a Delaware corporation, FATIMAH        )

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.             )

       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 of the 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 of the 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 of the 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 of the 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

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I    Woodward v. Emeritus Corp. 

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

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   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 of the 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

            Because we refer to three members of the Woodward family, we use their first
            I
     names for the convenience of the reader. We intend no disrespect.

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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 of the 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 Thesefacts 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.

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

I,
i            any action, dispute, claim or controversy of any kind, whether in contract or
             in tort, statutory or common law, personal injury, property damage, legal or
t            equitable or otherwise, arising out of the provision of assisted living
             services, healthcare services, or any other goods or services provided under

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             the terms of any agreement between the Parties, including disputes
             involving the scope of this Arbitration Agreement, or any other dispute
             involving acts or omissions that cause damage or injury to either Party, 

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           except for matters involving evictions. 

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     ld. 

             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

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       Woodward v. Emeritus Corp.
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i      the type of dispute that later arose. It argued that the agreement was procedurally
II
       unconscionable because it contained internally contradictory provisions and had been
•I 

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

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     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

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     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.

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

I    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

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

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

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     Woodward v. Emeritus Corp.
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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 of the Consumer Arbitration Rules and the parties'

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

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

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              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 of professional 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

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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

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

    R-l(a), (3) and (4), the Rules provide that if the 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 of rules 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 of the 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;

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     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.

II          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
1
I    limited to": home construction and remodeling contracts, real estate purchase and sale

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

     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

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No. 32880-5-III 

Woodward v. Emeritus Corp. 

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

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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).

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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 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). 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=IUCMlADRSTAGE20 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.

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     Woodward v. Emeritus Corp.

1

II                 [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
            for goods or services, such measures should include ... reasonable means
            by which Consumers may obtain additional information regarding the ADR

I           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]
                   b.     reasonable access to information regarding the arbitration
                          process, including basic distinctions between arbitration and

I                         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,

          https:llwww.adr.orglcs/idcplg?IdcService=GET_FILE&dDocName= ADR
            9
     STAGE2024674&RevisionSelectionMethod=LatestReleased (last visited Jan. 15,2016).

                                                  15 

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         Woodward v. Emeritus Corp. 

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

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

         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

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       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

                10https:llwww.adr.orglcs/idcplg?IdcService=GET_FILE&dDocName=
         ADRSTAGE2025859&RevisionSelectionMethod=LatestReleased (final report July 27,
         1998) (last visited Jan. 15, 2016).

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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 of the 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 Wash. 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
I
    contract defenses, such as fraud, duress, or unconscionability may be applied to

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

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

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

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

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

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

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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 Wash. 2d at 603

I    (quoting Adler, 153 Wash. 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 Wash. 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 Wash. 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 of the 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.

                                                   19
    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,

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

I   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).

                                                 20 

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 Wash. 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 not disputed 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

                                             21 

No. 32880-5-III
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 of the

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

        Wash. Court of Appeals oral argument, Woodward v. Emeritus Corp., No.
       14
32880-5-III (Sept. 10,2015) at 28 min., 21 sec. through 29 min., 00 sec (on file with the
court).

                                             22
No. 32880-5-II1 

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 Wash. App. 227.

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

                                             23 

No. 32880-5-III 

Woodward v. Emeritus Corp. 

of procedure 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 of procedure, whereas the AAA did
legislate a due process review process into the Rules. Nail, 155 Wash. 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 of procedure" 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 of procedure." Id. at 234.

                                              24 

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

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

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

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

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

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 Wash. App. at 458 (quoting Nelson, 127
Wash. 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 Wash. 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

                                                     25 

    1
    J
    !l
    I
    i
    !
    j	
    j    No. 32880-5-III
I        Woodward v. Emeritus Corp.

I        entitlement to an award of attorney fees. Adler, 153 Wash. 2d at 355. It would effectively
I        undercut the estate's right to attorney fees ifit prevails on its claim asserted under RCW
I
i        74.34.200(3). Emeritus does not explicitly concede that the attorney fees term is
~
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 

         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

I
!
         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

                                                       26 

,t 

I
I      No. 32880-5-III 

       Woodward v. Emeritus Corp. 

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

       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.

                                                    27 

I
J

II   No. 32880-5-III
     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. of Appellant 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 of Emeritus and its

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

       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 of Arbitration 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:

~~~
  CJ
. B wn,1.         I
                                           

                                    j

                                               30