Obstetrics & Gynecologists Ltd. v. Pepper

Brief Fact Summary. Rhonda Pepper (Plaintiff) was injured when Obstetrics & Gynecologists Ltd. (Defendant) prescribed an oral contraceptive. Plaintiff’s signature appeared on Defendant’s arbitration agreement. Defendant moved to order arbitration and to stay the lawsuit pending arbitration.

Synopsis of Rule of Law. There is no assumption of risk when a patient signs an agreement if the patient does not remember signing it and it was never explained to her.

Facts. Defendant requires its patients to sign an arbitration agreement, which provides that all disputes shall be submitted to binding arbitration. It was common procedure for Defendant’s receptionist to hand the patient the arbitration agreement along with two information sheets and inform him or her that any of their questions will be answered. The patient was required to sign before receiving treatment. If the patient refused to sign the arbitration agreement, then Defendant would refuse to give treatment. Plaintiff went to Defendant’s clinic to obtain a prescription for an oral contraceptive. Plaintiff suffered a cerebral incident, which left her paralyzed. Plaintiff’s signature is on Defendant’s arbitration agreement, but she did not remember signing it or having it explained to her. Defendant moved to order arbitration and to stay the lawsuit pending arbitration. The district court denied both motions. Defendant appealed.

Issue. If a patient signs an arbitration agreement without reading it or understanding it, does she assume the risk of the agreement?

Held. No. Judgment affirmed and case remanded for further proceedings.
* Since Defendant set up the existence of the agreement to preclude the lawsuit from proceeding, it had the burden of showing that a binding agreement existed. Defendant did not sustain the burden.
* The arbitration contract was an adhesion contract. An adhesion contract is a standardized contract form offered to consumers of goods and services essentially on a “take it or leave it” basis, without affording the consumer a realistic opportunity to bargain. The weaker party has no choice but to accept its terms.
* In this case, Plaintiff had no opportunity to modify its terms. Her choices were to sign the agreement or forego treatment. There was no clear notification of the terms and no understanding of consent. It was reasonable for the district court to find that Plaintiff did not give an informed consent to the agreement and that no meeting of the minds occurred.

Discussion. In this case, Plaintiff did not assume the risk of the terms of the arbitration agreement because she was not aware or made aware of its terms and consequences. The court applies the law of contracts. Meeting of the minds is a term used to describe offer and acceptance. This case is used to illustrate that in order to assume a risk, you must be aware or made aware of the risk.