KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** Big advantage to K&K Contracts January 21, 2025 ************************** Big advantage to K&K Contracts ************************** The K&K Standard Form Agreements offer the best contractual protection available in the alarm industry. That’s not just puffery. There are many reasons to support the claim, and today I will focus on one of them: The arbitration provision in the Kirschenbaum Contracts™. Like most of the provisions in the alarm contract the arbitration provision must be worded precisely if you expect it to be enforced. I suppose the first question that may come to mind is why would you want the arbitration provision enforced, i.e., why would you prefer to arbitrate your dispute as opposed to going to court? In almost all cases the answer is simple, it’s less expensive and faster, if you have selected the right arbitration forum, because they are not all alike. Some arbitration forums have become expensive to access and to use, requiring large filling fees, the use of 3 expensive arbitrators and exhaustive proceedings. You may as well have gone to court. Perhaps the best reason for opting for arbitration is that K&K will be able to support you [represent you] in the proceeding. Who better to represent you than the attorneys who wrote the contract and specialize in the alarm industry, including the areas of that industry that you concentrate? The K&K Standard Form Agreements have selected an arbitration forum that is less expensive and more conducive to streamline quick proceedings. The wording of the arbitration provision also is very broad yet unambiguous so that enforcement is likely, even in jurisdictions still hostile to the arbitration option. There are threshold issues that need to be resolved before an arbitration can proceed and a carefully worded arbitration clause can require that the arbitrator, not judge, decide issues of arbitrability. To be sure there can be challenges to the arbitration process that only a judge can determine, and the below case decided by a Federal Judge sitting in Ohio, well illustrates. The case involved a solar installation company who hooked in with a bank to provide financing got sued. Several parties, including the bank, has the case dismissed against them, and left the solar company alone to argue its case should go to arbitration. After the judge decided the one issue the judge thought he had the authority to adjudicate, the question of unconscionability of the solar contract, including its arbitration clause, the court dismissed the action and left the complaining home owner to the remedy of arbitration. The judge had several interesting things to say: “As indicated by the Court's dicta in Granite Rock, in the same way that the parties’ arguments matter, so, too, does the language in the relevant contractual provisions. Indeed, the contract language is a more threshold issue. The Supreme Court has explained that “the question [of] ‘who has the primary power to decide arbitrability’ turns upon what the parties agreed about that matter” because “the parties [can] agree to submit the arbitrability question itself to arbitration” in the same way as “any other matter that parties have agreed to arbitrate.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995); see AT&T Techs., Inc. v. Commc'ns Workers, 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). Such an agreement within an agreement has been referred to as a “delegation provision,” in which the parties can agree to arbitrate “ ‘gateway’ questions of ‘arbitrability.’ ” Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 68–69, 130 S.Ct. 2772, 177 L.Ed.2d 403 (2010); see, e.g., Becker v. Delek US Energy, Inc., 39 F.4th 351, 354 (2022) View Options. In this way, the presence of a delegation provision can alter the typical allocation of arbitration-related questions by textually committing a dispute to an arbitrator that would otherwise go to the court. Granite Rock Co., 561 U.S. at 299, 130 S.Ct. 2847.” “As a threshold matter, the law is clear that: (1) “arbitration cannot be forced upon parties who do not consent to it”; and (2) a party “cannot be excused from complying with the arbitration provision if it simply failed to properly read the contract.” Inland Bulk Transfer Co. v. Cummins Engine Co., 332 F.3d 1007, 1015–16 (6th Cir. 2003). Combined, “these two points establish the general rule that ‘one who signs a contract which he has had an opportunity to read and understand, is bound by its provisions.’ ” Id. (cleaned up) (quoting Stout, 228 F.3d at 715).” “As “arbitration agreements are fundamentally contracts, [federal courts] review the enforceability of an arbitration agreement according to the applicable state law of contract formation.” Seawright v. Am. Gen. Fin. Servs., Inc., 507 F.3d 967, 972 (6th Cir. 2007). Under Ohio law, an arbitration clause is unenforceable if a court finds it to be unconscionable. Taylor Bldg. Corp. of Am. v. Benfield, 117 Ohio St. 3d 352, 2008-Ohio-938, 884 N.E.2d 12 (2008). Unconscionability encompasses two separate concepts: (1) individualized circumstances surrounding each of the parties to a contract such that no voluntary meeting of the minds was possible, i.e., “procedural unconscionability”; and (2) unfair and unreasonable contract terms, i.e., “substantive unconscionability.” Eastham v. Chesapeake Appalachia, L.L.C., 754 F.3d 356, 365 (6th Cir. 2014) (internal quotation marks omitted) (citing Collins v. Click Camera & Video, Inc., 86 Ohio App. 3d 826, 621 N.E.2d 1294, 1299 (1993)). To demonstrate that an arbitration clause is unenforceable, the party asserting unconscionability must prove that the clause is both substantively and procedurally unconscionable under Ohio precedent. Hayes v. Oakridge Home, 122 Ohio St.3d 63, 908 N.E.2d 408 (2009).” “When evaluating procedural unconscionability, the key question is whether “each party to the contract, considering his obvious education or lack of it, [had] a reasonable opportunity to understand the terms of the contract, or [if] the important terms [were] hidden in a maze of fine print[.]” Ohio Univ. Bd. of Trs. v. Smith, 132 Ohio App. 3d 211, 724 N.E.2d 1155, 1161 (1999) (citing Lake Ridge Academy v. Carney, 66 Ohio St. 3d 376, 383, 613 N.E.2d 183, 189 (1993)). To answer this question, Ohio courts look to “factors bearing on the relative bargaining position of the contracting parties, including their age, education, intelligence, business acumen and experience, relative bargaining power, who drafted the contract, whether the terms were explained to the weaker party, and whether alterations in the printed terms were possible.” Cross v. Carnes, 132 Ohio App. 3d 157, 724 N.E.2d 828, 837 (1998). But the Ohio Supreme Court has found that “the law does not require that each aspect of a contract be explained orally to a party prior to signing.” ABM Farms, Inc. v. Woods, 81 Ohio St. 3d 498, 692 N.E.2d 574, 578 (Ohio 1998). And, relevant here, “[a] person who signs a contract without making a reasonable effort to know its contents cannot, in the absence of fraud or mutual mistake, avoid the effect of the contract.” Pippin v. M.A. Hauser Enters., Inc., 111 Ohio App. 3d 557, 676 N.E.2d 932, 937 (1996).” “In arguing that Pink Energy's dual-agent salesperson-loan representative model was procedurally fraudulent, Plaintiffs highlight the auto-generated nature of the 34-page legal document that was presented for signature after less than one minute of explanation, during which the salesperson emphasized the need to “act[ ] fast.” (ECF No. 130 at 12). Plaintiffs claim that they were never informed of an agreement to arbitrate, nor did they sign the page containing this agreement, as they “input their signature and initials once in the DocuSign system” which was then copied and pasted into the remaining signature lines. (Id.). They explain that they had no ability to review the contract independently, let alone review it with a lawyer or negotiate the terms of the agreement. (Id. at 12–13). In support of these arguments, they point to the Stark County court's finding of procedural unconscionability in these exact circumstances. (Id. at 13 (citing Cleveland v. Power Home Solar, LLC., Stark County, Ohio Case No. 23-CV-00730, July 31, 2023, and November 8, 2023 Orders)). But in Pink Energy's view, Plaintiffs never allege “any specific misrepresentation” as to the agreement to arbitrate, as is required under Sixth Circuit and Supreme Court precedent. (ECF No. 129 at 16). Without this, because Plaintiffs did not ask for more time to read and understand the Arbitration Clause and because Plaintiffs signed the Sales Agreement, Pink Energy asserts that the Arbitration Clause is procedurally sound. (Id. at 17).” “Here, Plaintiffs make no allegations of an issue regarding general education and intelligence, though they highlight their lack of knowledge of solar panel systems. (ECF No. 130 at 12). There is also no indication that Plaintiffs were unable, because of time or mental capability, to read and comprehend the agreement, even if that required asking for more time. See Hurst v. Enter. Title Agency, Inc., 2004-Ohio-2307, 157 Ohio App. 3d 133, 809 N.E.2d 689 (11th Dist.). While this Court appreciates Plaintiffs’ assertion that they felt they had no ability to alter the terms of the contract, they “failed to inquire or engage [the salesperson] in any conversation, let alone negotiations, regarding the *771 terms of the agreement.” Id. Indeed, “many modern insurance policies are contracts of adhesion,” which “have two notable characteristics: disparate levels of sophistication between the parties and a one-sided ‘take it or leave it’ form that does not allow for even-handed bargaining.” Old Republic Ins. v. Underwriters Safety, 306 F. App'x 250, 254 (6th Cir. 2009). While it is uncertain whether Plaintiffs could have made alterations to the Sales Agreements had they wished to do so, “by itself, the inability to alter a contract's terms is insufficient to establish procedural unconscionability.” Metro. Prop. & Cas. Ins. Co. v. Pest Dr. Sys., Inc., No. 3:14-cv-143, 2015 WL 4945767, at *9 (S.D. Ohio Aug. 20, 2015) (citing Collins, 86 Ohio App. 3d at 835, 621 N.E.2d at 1300). What is more, “Ohio courts have declined to find so-called ‘adhesion contracts’ procedurally unconscionable where alternative sources exist for nonessential goods or services.” Id. (collecting cases). As Plaintiffs were free to decline Pink Energy's terms and find an alternative solar panel service, their inability to alter the Sales Agreement Arbitration Clauses does not make them procedurally unconscionable. Additionally, the Arbitration Clause was not hidden and is the same size as the rest of the contract. See Ball v. Ohio State Home Servs., Inc., 2006-Ohio-4464, ¶ 9, 168 Ohio App. 3d 622, 861 N.E.2d 553 (9th Dist.). True, the salesperson went through the contract extremely quickly and did not mention or explain the arbitration provision and what that entailed. Also true, none of the Plaintiffs has been a party to a solar energy contract before. But in light of the above, without more, contracting to arbitrate under these circumstances does not rise to the level of procedural unconscionability.” The Court also distinguished this case from an case decided by Ohio’s highest court, which denied arbitration. “Compare the contract signing process here to that in Williams v. Aetna Fin. Co., wherein the Ohio Supreme Court opined that “all of the attendant facts and circumstances” “clearly would support a finding that the arbitration clause violated principles of equity[.]” 83 Ohio St. 3d 464, 472, 700 N.E.2d 859 (1998). There, Williams, an elderly woman, contracted with a pitchman for interior and exterior home repairs—that is, effectively a salesperson who does not perform the repairs himself, but contracts the work out the others. Id. at 465, 700 N.E.2d 859. Over the next few weeks, the pitchman's employees transported Williams to a specific branch of a specific bank in order for Williams to sign for loans for the services and other debts as a result of the pitchman's relationship and status with the branch manager. Id. at 465–66, 700 N.E.2d 859. Despite having a $420 or $430 income per month with $190 allocated to other debts, the bank nonetheless set Williams up with a combined $315 monthly payment toward these loans alone and charged her hundreds of dollars in fees up front. Id. Williams signed some of the loan checks directly to the pitchman. Id. at 466, 700 N.E.2d 859. Yet the workers coordinated by the pitchman completed only a minimal amount of the work contracted for and eventually stopped showing up, and the pitchman refused to respond to Williams about the unsatisfactory performance. Id. So, after two payments, Williams ceased payments on the loans and brought suit against the pitchman and the bank, alleging a fraudulent scheme in which the pitchman prayed on unsophisticated, low-income, elderly homeowners to his and the bank's benefit, as both knew the homeowners would acquire loans from this specific bank branch and yet the work would not be completed. *772 Id. 466–68, 700 N.E.2d 859. Indeed, witnesses testified that the bank employees were accepting direct payments from the pitchman. Id. at 468, 700 N.E.2d 859. The trial court denied the bank's motion to compel based on language in the loan agreement and, rejecting the idea that the loan agreements and home improvement contracts were “separate transactions,” the jury found in favor of Williams. Id. at 468–69, 700 N.E.2d 859. After weaving its way through the lower courts, the Ohio Supreme Court affirmed the denial of arbitration based on the infirmity of the contract. Id. at 472–73, 700 N.E.2d 859. 18Plaintiffs’ situation here is not on all fours with Williams.’ Instead, this situation falls within “the well-settled principle that a person who is competent to contract and who signs a written document without reading it is bound by its terms and cannot avoid its consequences.” Eng. v. Cornwell Quality Tools Co., 2005-Ohio-6983, ¶ 22, 2005 WL 3556281 (9th Dist.). Because the Arbitration Clauses are not procedurally unconscionable, Plaintiffs have failed to meet their burden of demonstrating the unconscionability of the agreement, and so the Arbitration Clauses are enforceable.” The case is Hutzell v Power Home Solar, 734 F.Supp. 3rd 761. ************************************* STANDARD FORMS Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** ALARM ARTICLES: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles updated daily ******************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth ****************************** Getting on our Email List / Email Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. You can read articles and order alarm contracts on our web site www.alarmcontracts.com ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com