The Washington Supreme Court—in Gandee v. LDL Freedom Enterprises, Inc., 176 Wn.2d 598 (2013)—recently examined the validity and enforceability of a contractual arbitration provision and found, under the circumstances, that the clause was “unconscionable” and therefore unenforceable. Although the case did not occur within a construction setting, it nevertheless presents important lessons to consider when drafting, negotiating or complying with mandatory arbitration provisions in construction agreements.  

In Gandee, a borrower, under a debt adjustment contract, brought suit against LDL Freedom Enterprises, Inc. (“Freedom”), seeking to recover damages based on alleged violations of the Washington Consumer Protection Act (the “CPA”) (RCW 19.86, et seq.) and the Debt Adjusting Act (RCW 18.28, et seq.). Id. at 601-02. Freedom moved to compel arbitration based on the following arbitration clause reflected in the parties’ agreement:

Arbitration. 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. Any arbitration proceedings brought by Client shall take place in Orange County, California. Judgment upon the decision of the arbitrator may be entered into any court having jurisdiction thereof. The prevailing party in any action or proceeding related to this Agreement shall be entitled to recover reasonable legal fees and costs, including attorney’s fees which may be incurred.

Id. at 602 (brackets in original). In addition, the agreement contained a common “severability clause,” providing that “[i]f any of the above provisions are held to be invalid or unenforceable, the remaining provisions will not be affected.” Id.