Frogs, Water Lilies and Arbitration

A California appellate court has refused to enforce a contractual arbitration provision “because the clause is as inconspicuous as a frog in a thicket of water lilies.” As the court explained in Domestic Linen Supply Company, Inc. v. LJT Flowers, Inc.,

“Here the trial court could reasonably determine that there was no agreement to arbitrate. The form of the rental agreement is deceptive. The arbitration clause is not above the purchaser’s signature, where one would expect to find it. Instead, it is after the purchaser’s signature, on the back of the agreement. The back is filled from top to bottom with closely spaced lines of small type. The arbitration clause is number 15 of 21 paragraphs. There is nothing to distinguish paragraph 15 from any other paragraph. There is no heading, boldface, italics, or capitalization that would draw attention to it. It is simply hidden in a thicket of fine print. The warning that the garments Domestic provides are not fire-resistant is in capitalized, boldface type, but not the provision waiving the purchaser’s constitutional right to a jury trial.

“Moreover, Domestic’s sales representatives are not trained to bring attention to the arbitration clause. Instead, they are advised to have the purchaser read the personal guaranty while they fill out the contract, thus diverting the purchaser’s attention from the back of the contract. There is no mention of arbitration in the personal guaranty.

“If the contract is not intentionally deceptive, it has that effect. There was simply no agreement to arbitrate.”

Adding insult to injury, the party seeking to enforce the arbitration provision was required to pay the attorneys’ fees of the prevailing party.

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