Kentucky Appeals Court strikes hidden arbitration clause

On April 16, 2008, the Court of Appeals of Kentucky denied a petition for rehearing of its order affiming a finding by the Pike Circuit Court that an arbitration clause between Paul Miller Ford, Inc. ("Miller Ford") and Bridgette Rutherford was unenforceable. Paul Miller Ford, Inc. v. Rutherford, No. 2007-CA-000293-MR (Ky. 2007).

The arbitration clause was "tucked" into an untitled document drafted in questionnaire form, which the Court described as "the kind of performance evaluation that might be passed out at a restaurant or hotel." Rutherford signed the document at a designated spot and a representative of Miller Ford signed the document as a witness.

The Court of Appeals was called upon to decide if the clause was unconscionable and found the following factors persuasive: there was no discussion of the clause or its consequences; the clause was hidden in an innocuous document; the actual clause was the last in a series of paragraphs summarizing the transaction; and the Miller Ford representative signed as a mere witness as opposed to a company representative. As a result, Rutherford was given "no meaningful notice of its true importance so as to create a meeting of the minds." Therefore, the clause was unconscionable and unenforceable.