Delegation and Arb Rules

Nelson v. Dual Diagnosis Treatment Center, Inc., No. G059565 (D4d3 Apr. 19, 2022)

This is an appeal of the denial of a motion to compel arbitration. The trial court found the agreement to be unconscionable and the Court of Appeal agrees. By all indications, the signatory was a schizophrenic off his meds being admitted to an unlicensed drug detox facility, in which we would later hang himself. And the provisions of the arb agreement seem pretty unfair as a matter of substance. Not much to see here.

But the interesting thing is a bit on whether the unconscionability analysis should get delegated to the arbitrator. The agreement designates the AAA rules, which provide that an arbitrator can decide his or her own jurisdiction. Cases have found that selecting the AAA rules is the kind of “clear and unmistakable” expression of intent that is adequate to delegate arbitrarily. The Court here is skeptical if that rule should apply when one of the parties is unsophisticated. But that is not the ultimate basis of the decision. The Court finds that other indicia in the agreement regarding decisions being made by courts render any expressed intent to delegate, at best, ambiguous. And an ambiguous statement of intent is not clear and unmistakable. 

Affirmed.