Fox & Farley, Attorneys at Law

When Will a Tennessee Court Find Mandatory Arbitration “Unconscionable”?

Forced arbitration is an ongoing problem for Tennessee residents seeking justice. Many nursing home abuse, medical malpractice, and other personal injury claims are kept out of court through mandatory arbitration clauses in contracts. In most cases, the injured party (or their family) is unaware they are signing away their due process rights. And Tennessee courts are normally predisposed to enforce such arbitration clauses.

But there are exceptions. The Tennessee Supreme Court has held an arbitration clause is not enforceable when its terms “are beyond the reasonable expectations of an ordinary person, or oppressive or unconscionable.” There is no single standard for determining when a contract is “unconscionable,” but one thing a court will look for is whether one party is blatantly abusing its unequal bargaining power over the other party.

Court Rejects Arbitration in Funeral Home Scandal Class Action

On that point, the Tennessee Court of Appeals recently declined to enforce a mandatory arbitration clause in a contract involving a funeral home. This appeal was just a small part of a larger class action arising from the State of Tennessee’s 2014 seizure of a Memphis cemetery. According to a complaint filed by state regulators, the cemetery was operating without a proper license and “improperly buried bodies…by placing two or more bodies in the same grave.” The cemetery also illegally buried bodies on land it did not own and which was not approved for such use.

Family members horrified to learn their relatives were effectively buried in mass graves sued not only the cemetery’s owners, but several funeral homes which did business with the cemetery. This class action alleged the funeral homes should have known they were dealing with an unlicensed cemetery and ultimately failed to properly supervise the burial of the plaintiffs’ loved ones.

This litigation remains pending. But one of the defendant funeral homes moved to compel arbitration of one of the plaintiff’s claims. This plaintiff hired the defendant to arrange her father’s funeral and burial. After taking possession of the body and making most of the arrangements, the funeral home asked the plaintiff—a college student at the time—to sign a purchase agreement. The agreement contained a single sentence declaring the plaintiff, by signing the contract, agreed any claim she might have against the funeral home “shall be resolved by arbitration and you are giving up your right to a court or jury trial, as well as your right of appeal.”

The trial court, and later the Court of Appeals, determined this clause was “unconscionable” and therefore unenforceable. For one thing, the Court of Appeals noted, “Nothing in the Contract indicates the procedure for seeking arbitration, how an arbitrator will be appointed, the binding effect of arbitration, or any of the procedure to be utilized during the arbitration proceedings.” Second, and more importantly, the contract was offered to the plaintiff on a “take it or leave it” basis, offering no opportunity for the parties to bargain. And given the plaintiff’s “lack of knowledge of the funeral services industry” and her lack of bargaining power due to her immediate need for funeral services, the Court of Appeals said this all added up to a finding mandatory arbitration would be unconscionable.

Need Help Fighting Mandatory Arbitration?

It should be noted the Court of Appeals said mandatory arbitration is not a common practice in the funeral home industry. But it is common in many other industries, such as health care and nursing homes. That is why you should always work with an experienced Tennessee personal injury lawyer who understands how to deal with potentially unconscionable arbitration clauses. Contact the offices of Fox & Farley, Attorneys at Law, in Knoxville or Clinton today if you would like to speak with someone about your case.

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