NEW ORLEANS – A Louisiana Supreme Court recently ruled, despite contention among judges, that an arbitration clause within a contract for an indoor trampoline park's participation agreement was not enforceable because it was adhesionary and lacked mutuality of consent.
Chris Kennedy, managing partner of Kennedy & Kennedy Law Firm, explained how this works.
"An adherisionary contract is one drafted by one party," Kennedy told the Louisiana Record in an email. "The court in this case found that there was no quid pro quo for the requirement that it was being placed in the contract for the benefit of one party without the other party receiving an equal benefit. In this case the request was that disputes be arbitrated rather than litigated."
Duhon v. ACTIVELAF LCC, d/b/a Sky Zone Lafayette et al., No. 2016-0810 is an important case to understand for Louisiana employers with arbitration agreements because it details how arbitration clauses can be construed with some varying degree of opinion in the court.
For instance, one of the judges on the court issued a strong dissenting opinion, noting the arbitration clause to be both valid and enforceable. Another justice said it lacked mutuality but the provision was not hidden to the consumer.
The two opinions were not enough though. The other judges, and the full court, ultimately decided that the contract lacked mutuality "to such an extent" that it was adhesionary, concealed the clause for arbitration and actually penalized patrons for litigation
James Duhon and three children visited a Sky Zone in Lafayette in April 2015. One of the staff members directed Duhon to electronically sign a participation agreement form himself and the children, according to the suit, which involved checking three boxes acknowledging the risk of injury and waiving and releasing all claims against Sky Zone. Duhon agreed to binding arbitration and to pay liquidated damages if he filed suit but it was not clear to Duhon what this meant, the suit states.
Duhon claimed he was injured at Sky Zone and he sued the company. Sky Zone responded by filing a number of exceptions. One of those exceptions was of prematurity, and alleged the agreement contained a mandatory arbitration clause. A trial court refused to enforce the arbitration because Duhon was the only party bound to arbitrate these claims. The 1st Circuit Court of Appeals reversed that decision, presuming the favored enforceability of arbitration agreements expressed through many Supreme Court decisions in the state.
The Supreme Court disagreed with the appeals court, however. Though state and federal law “explicitly” favors enforcement of arbitration clauses, the high court found Sky Zone’s arbitration clause was adhesionary because of its placement in the agreement as well as the lack of mutuality. In regards to placement within the agreement, the court found language buried in the document concealed the clause like camouflage because it lacked features that distinguished it as a clause for arbitration.
The court also found that nowhere in the agreement was Sky Zone bound to arbitration. Most disturbing to the court was the punitive damages provision that required patrons like Duhon to pay liquidated damages of $5,000 within 60 days of filing a lawsuit, compiling 12 percent per year in legal interest fees.