King v. Bryant

An unpublished opinion of the North Carolina Court of Appeals does not constitute

controlling legal authority. Citation is disfavored, but may be permitted in

accordance with the provisions of Rule 30(e)(3) of the North Carolina Rules of

A p p e l l a t e P r o c e d u r e .

NO. COA13-1003

NORTH CAROLINA COURT OF APPEALS

Filed: 15 July 2014

ROBERT E. KING and wife,

JO ANN O’NEAL,

Plaintiffs,

v. Cumberland County

No. 11 CVS 8280

MICHAEL S. BRYANT, M.D., and

VILLAGE SURGICAL ASSOCIATES, P.A.,

Defendants.

Appeal by Defendants from Order entered 10 May 2013 by

Judge Lucy N. Inman in Cumberland County Superior Court. Heard

in the Court of Appeals 22 January 2014.

Beaver, Holt, Sternlicht & Courie, P.A., by Mark A.

Sternlicht, for Plaintiffs.

Walker, Allen, Grice, Ammons & Foy, L.L.P., by O. Drew

Grice, Jr., for Defendants.

STEPHENS, Judge.

I. Factual Context and Procedural Posture

This case arises from a medical malpractice action filed by

Plaintiffs Robert E. King and Jo Ann O’Neal on 28 September 2011

in Cumberland County Superior Court. Therein, Plaintiffs allege

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that Defendant Michael S. Bryant negligently performed a

laparoscopic bilateral inguinal hernia repair on King on 14 May

2009. On 4 November 2011, Defendants submitted a motion to stay

proceedings in superior court and to enforce an agreement to

alternative dispute resolution (“the arbitration agreement”)

between the parties. Plaintiffs moved the court to deny that

motion on 16 November 2011, asserting that the arbitration

agreement is not enforceable.

In pertinent part, the arbitration agreement provides as

follows:

Village Surgical Associates, PA

Agreement to Alternative Dispute Resolution

In accordance with the terms of the Federal

Arbitration Act, 9 USC 1-16, I agree that

any dispute arising out of or related to the

provision of healthcare services by me, by

Village Surgical Associates, PA, or its

employees, physician members and agents,

shall be subject to final and binding

resolution through private arbitration.

The parties to this Agreement shall agree

upon three Arbitrators and at least one

arbitrator of the three shall be a physician

licensed to practice medicine and shall be

board certified in the same specialty as the

physician party. The remaining Arbitrators

either shall be licensed to practice law in

NC or licensed to practice medicine in NC.

The parties shall agree upon all rules that

shall govern the arbitration, but may be

guided by the Health Care Claim Settlement

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Procedures of the American Arbitration

Association, a copy of which is available to

me upon request. I understand that this

agreement includes all health care services

which previously have been or will in the

future be provided to me, and that this

agreement is not restricted to those health

care services rendered in connection with

any particular treatment, office or hospital

admission. I understand that this agreement

is also binding on any individual or entity

and not a precondition to receiving health

care services.

. . . .

(Emphasis in original). The arbitration agreement was signed on

29 April 2009, approximately two weeks before King’s surgery.

A hearing on Defendants’ motion was held on 12 March 2012.

The trial court issued an order that same day, denying

Defendants’ motion on the grounds that the arbitration

agreement: (1) “leaves material portions open to future

agreements by providing, inter alia, that the parties shall

agree upon three arbitrators and . . . agree upon all rules that

shall govern the arbitration”; (2) is an “agreement to agree”;

and (3) is not a binding contract. Defendants appealed the order

to this Court on 10 April 2012 in King v. Bryant, __ N.C. App.

__, __, 737 S.E.2d 802, 805 (2013) [hereinafter King I]. In an

opinion filed 5 February 2013, this Court concluded that the

arbitration agreement was not invalid for indefiniteness

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regarding the identity of the arbitrators or the procedures to

be followed during arbitration. Id. at __, 737 S.E.2d at 807–08.

We declined, however, to address Plaintiffs’ arguments that the

arbitration agreement was unconscionable and inapplicable to

O’Neal and remanded the case to the trial court with

instructions to address those arguments. Id. at __, 737 S.E.2d

at 808.

A new hearing was held on 21 March 2013. On 10 May 2013,

the trial court entered an order again denying Defendants’

motion to compel arbitration. The court concluded that the

agreement was unenforceable as to King because it was a product

of constructive fraud and unconscionability. As to O’Neal, the

court concluded that the agreement was not enforceable because

she did not sign the agreement and because she neither

benefitted nor sought to benefit from the agreement. Defendants

appeal.

II. Appellate Jurisdiction & Standard of Review

As we noted in King I,

North Carolina law generally permits a party

to appeal only from a final judgment of the

superior court. A final judgment is defined

as one which disposes of the cause as to all

the parties, leaving nothing to be

judicially determined between them in the

trial court. However, the [legislature]

additionally permit[s] an aggrieved party in

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a civil proceeding to appeal from any

interlocutory order or judgment of a

superior or district court which affects a

substantial right.

Here, the trial court’s order is not a final

disposition of this case; thus, it is

interlocutory. However, our courts have held

that the denial of a motion to compel

arbitration, although interlocutory, is

nevertheless immediately appealable, as it

affects a substantial right. Therefore, we

have jurisdiction to hear Defendants’

appeal.

A trial court’s determination that an action

is subject to arbitration is a conclusion of

law which we review de novo. Under a de novo

review, the court considers the matter anew

and freely substitutes its own judgment for

that of the lower tribunal.

Id. at __, 737 S.E.2d at 805–06 (citations, internal quotation

marks, brackets, and ellipses omitted; emphasis in original). In

addition, the trial court’s findings of fact are conclusive on

appeal when supported by competent evidence, even where the

evidence might have supported findings to the contrary. See

Evangelistic Outreach Ctr. v. Gen. Steel Corp., 181 N.C. App.

723, 726, 640 S.E.2d 840, 843 (2007) (affirming the trial

court’s denial of the defendant’s motion to compel arbitration).

“Conclusions of law drawn by the trial court from its findings

of fact are reviewable de novo on appeal.” Carolina Power &

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Light Co. v. City of Asheville, 358 N.C. 512, 517, 597 S.E.2d

717, 721 (2004) (citation omitted).

III. Discussion

On appeal, Defendants argue that the trial court erred by

denying their motion to compel arbitration because the

arbitration agreement is not a product of constructive fraud and

not unconscionable. Defendants also contend that O’Neal is bound

by the arbitration agreement despite being a non-signatory. We

affirm the trial court’s opinion on the grounds that the

arbitration agreement is unconscionable. We do not address

Defendants’ argument as it relates to the applicability of the

arbitration agreement to O’Neal.

1. Background

In King I, we declined to address the unconscionability and

non-signatory issues raised by Plaintiffs because the trial

court did not reach those issues in its original order. Id. at

__, 737 S.E.2d at 808–09. Observing that “the trial court is the

appropriate body to determine whether the [arbitration]

agreement is unconscionable,” we remanded the case with

instructions for the court to undertake “any unconscionability

analysis . . . with an understanding of the unique nature of the

physician/patient relationship.” Id. at __, 737 S.E.2d at 808.

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We also directed the trial court to “apply North Carolina’s law

of unconscionability” and commented on the following

“particularly important” considerations as relevant to the

fiduciary nature of the parties’ physician/patient relationship:

While nearly every court to consider the

issue has concluded that medical malpractice

claims can properly be submitted to

arbitration, issues have been raised as to

patients’ understanding of arbitration

contracts and the potentially coercive

circumstances under which the agreements are

made. The use of arbitration clauses in

contracts for healthcare services is

distinct from their use in settling labor or

commercial disputes because the legal

relationship between provider and patient is

determined by both private contract law and

public tort law. There is tension between

contract law, the principles of which have

been applied to binding arbitration clauses

in labor[] and commercial agreements for

years[,] and the application of tort law to

enforce conformity with standards of care

desired by society, particularly standards

of professional care.

Id. (citation omitted). In addition, we pointed out that

[the] fiduciary relationship [carries] an

[inherent] affirmative duty to disclose all

facts material to a transaction.

Under North Carolina law, fiduciary

relationships create a rebuttable

presumption that the plaintiff put his trust

and confidence in the defendant as a matter

of law. Once [the] presumptive fiduciary

relationship is alleged, it is the defendant

who bears the burden of showing he or she

acted openly, fairly[,] and honestly in

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bringing about the transaction. This means

that the defendant must prove, by the

greater weight of the evidence, that, with

regard to the transaction, the defendant

made a full, open disclosure of material

facts, that he dealt with the plaintiff

fairly, without oppression, imposition or

fraud, and that he acted honestly.

Id. at __, 737 S.E.2d at 809 (citations, internal quotation

marks, and brackets omitted; emphasis in original). Lastly, we

observed that the “North Carolina Constitution provides a

‘sacred and inviolable’ right to a jury trial in all

controversies at law respecting property” and any agreement

waiving that right “must be examined cautiously, especially in

situations in which a fiduciary relationship is present, as

. . . here.” Id. at __, 737 S.E.2d at 809 (brackets and certain

quotation marks omitted).

“[H]eeding the guidance of the Court of Appeals,” the trial

court made the following relevant findings of fact and

conclusions of law on remand:

FINDINGS OF FACT

. . . .

2. . . . King, now 68, has no educational

degree beyond high school and his job

requires little reading. He has minimal

experience reading legal documents.

3. Defendant[s] . . . [have] experience in

managing patient complaints, responding to

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claims of medical negligence made by

patients, and resolving disputes through

arbitration.

4. On April 29, 2009[] Plaintiffs visited

Defendants’ office for the first time to

consult with . . . Bryant about performing

laparoscopic surgery on . . . King to repair

a hernia. . . . King had been referred to

Defendants by his primary care physician.

5. While Plaintiffs were waiting to meet

. . . Bryant and consult with him about

performing the surgery, Defendants’

receptionist provided . . . King with

several intake forms to complete and sign.

. . . King considered the forms to be a

formality.

6. Neither the receptionist, nor . . .

Bryant, nor any agent of Defendants called

to . . . King’s attention the fact that

. . . [the arbitration agreement] differed

from all of the other forms because it did

not concern medical information, insurance

information, or payment for the surgery, all

routine for a new patient. Nor did anyone

disclose to . . . King that the [arbitration

a]greement sought to foreclose his access to

the judicial process in the event that any

dispute arose out of or related to the

surgery to be performed by . . . Bryant.

. . . .

8. The [arbitration a]greement does not

provide that by signing it, the patient

waives his or her right to a trial. The

[arbitration a]greement does not include the

word “jury” or “judge” or “trial.” The

[arbitration a]greement does not provide

that the patient can consult an attorney

before signing it.

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9. There is no evidence that [Bryant] or any

agent of Defendants discussed with . . .

King[] any provision of the [arbitration

a]greement.

10. . . . King . . . signed the signature

lines on all the forms, including the

[arbitration a]greement, without reading

them, believing they were all routine forms

necessary for his medical care.

11. At the time . . . King signed the

[arbitration a]greement and provided his

medical information on intake forms, even

though he had not yet met . . . Bryant, he

was already placing his confidence and trust

in Defendants, as demonstrated by his

willingness to share his confidential

medical information.

12. . . . King was not provided with a copy

of the signed [arbitration a]greement, so he

had no opportunity to review [it] during the

two weeks after he signed it and before his

scheduled surgery.

13. Defendants or their agents drafted the

[arbitration a]greement, which was identical

to form arbitration agreements presented to

each new patient at Village Surgical for two

years or more prior to . . . King’s first

office visit.

14. The first, bold-faced paragraph of the

[arbitration a]greement is poorly drafted,

confusing, and nonsensical. For example, it

refers to “the provision of healthcare

services by me,” suggesting that “me” refers

to the physician rather than the patient.

15. The [arbitration a]greement repeatedly

refers to arbitration without defining that

term. [It] includes no mention whatsoever of

the judicial process, a trial, or a jury.

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The [arbitration a]greement does not

disclose Defendants’ intent for . . . King

to waive his rights to the judicial process

. . . in the event of any claim arising from

. . . the surgery. A person of . . . King’s

education and experience should not

reasonably have been expected to know from

the language of the [arbitration a]greement,

or from any information provided to him by

Defendants, that he had a right to a jury

trial to resolve any potential dispute with

his surgeon. Nor should he have been

expected to understand from the language of

the [arbitration a]greement or other

information provided to him by Defendants

that by signing the [arbitration a]greement,

he would waive his right to a jury trial.

16. The last sentence of the second

paragraph in the [arbitration a]greement

starts with complex but complete clauses —

“I understand that this agreement is also

binding on any individual or entity” — and

ends with an incomplete clause — “and not a

precondition to receiving health care

services” — which contains no verb and

assumes the reader infers that the

antecedent subject to this clause is the

[arbitration a]greement. A person of . . .

King’s education and experience should not

reasonably be expected to understand the

last, tacked on, incomplete clause to mean

that he did not need to sign the

[arbitration a]greement in order for . . .

Bryant to perform the surgery.

17. Plaintiff . . . read the [arbitration

a]greement after a copy of it was provided

to him by his attorney, and he still did not

understand its contents or the intended

consequence of signing it.

18. Unlike arbitration agreements which have

been upheld and enforced in medical

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negligence cases, the [arbitration

a]greement includes no provision allowing or

recommending that the patient consult with

an attorney regarding the [arbitration

a]greement prior to signing it.

. . . .

20. The [arbitration a]greement’s provision

requiring at least one physician arbitrator,

and its provision allowing all three

arbitration panelists to be physicians,

confer a benefit to Defendants and a

detriment to Plaintiffs. Although physicians

are not, based solely on their occupations,

excused by courts from serving as jurors in

medical negligence cases, the [c]ourt takes

judicial notice that counsel for physicians

in medical negligence trials generally seek

to excuse potential jurors who have

previously been party to a negligence case,

while counsel for patients in medical

negligence trials generally seek to excuse

physicians and other medical providers.

. . . .

23. . . . [A] receptionist at Defendant

Village Surgical[] stated in a sworn

affidavit that the form arbitration

agreement is included in “registration

paperwork” presented to each new patient

when he or she visits the practice for an

initial appointment, prior to meeting with a

physician. [The receptionist’s] affidavit

further stated that each new patient is

given ample time while waiting in the lobby

to ask any questions about any of the

documents provided for completion and

signature. . . . [She] did not state that

she, . . . Bryant, or any agent of Defendant

Village Surgical routinely makes any effort

to call a new patient’s attention to the

form arbitration agreement or to explain

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that the form seeks to preclude the patient

from pursuing a claim against Defendants in

the judicial process. It is reasonable to

infer from [her] statement that . . . it is

the practice of Defendants to obscure the

. . . agreement by presenting it among a

pile of other documents without pointing it

out or explaining its contents.

. . . .

CONCLUSIONS OF LAW

. . . .

3. Defendants were fiduciaries of . . . King

as a result of the physician-patient

relationship.

4. Defendant[s] . . . breached their

fiduciary duties to . . . King by failing to

disclose to him all material terms of the

[arbitration a]greement and failing to deal

with him openly, fairly, honestly, and

without imposition, oppression, or fraud in

procuring his signature on the [arbitration

a]greement.

5. The fact that . . . King did not read the

[arbitration a]greement before signing it

does not preclude his objection to its terms

because the provisions of the [arbitration

a]greement are far from clear and

unequivocal.

6. The [arbitration a]greement is a product

of constructive fraud and is therefore

unenforceable.

7. The [arbitration a]greement is

unconscionable and is therefore

unenforceable.

2. The Validity of the Arbitration Agreement as to King

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Defendants do not argue that the trial court’s findings of

fact are not based on competent evidence.1 Rather, they assert

that a fiduciary relationship did not exist between the parties

at the time King signed the arbitration agreement, which

“indicates that the events surrounding the execution of the

arbitration agreement did not involve constructive fraud,” and

argue that the arbitration agreement did not suffer from

procedural or substantive unconscionability as a matter of law.

We disagree.

A. Fiduciary Relationship and Constructive Fraud

Defendants assert that a fiduciary relationship did not

exist at the time King signed the arbitration agreement because

Bryant had not yet accepted King as a patient. Therefore,

Defendants argue, the execution of the agreement did not involve

constructive fraud. We lack authority to address this issue on

its merits.

In King I, we stated that a fiduciary relationship existed

between the parties and directed the trial court to consider

that fact on remand. __ N.C. App. at __, 737 S.E.2d at 809

(observing that “considerations [of unconscionability] are

1

Therefore, the trial court’s findings are presumed to be

supported by competent evidence and are binding on appeal. See

Koufman v. Koufman, 330 N.C. 93, 97, 408 S.E.2d 729, 731 (1991).

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particularly important given the fact that the physician/patient

relationship is a fiduciary one” and directing the trial court

to “be mindful of [the] burden shifting framework [applicable

when the parties have a fiduciary relationship] in evaluating

Plaintiffs’ argument that the [arbitration a]greement is

unconscionable”). That conclusion constitutes the law of the

case and cannot be disturbed by a subsequent panel of this

Court. See N.C. Nat’l Bank v. Va. Carolina Builders, 307 N.C.

563, 567, 299 S.E.2d 629, 631–32 (1983) (“[O]nce a panel of the

Court of Appeals has decided a question in a given case that

decision becomes the law of the case and governs other panels

which may thereafter consider the case. Further, since the power

of one panel of the Court of Appeals is equal to and coordinate

with that of another, a succeeding panel of that [C]ourt has no

power to review the decision of another panel on the same

question in the same case.”). As a result, we are bound for

purposes of this opinion by the prior panel’s determination that

a fiduciary relationship existed between the parties.2 Thus,

2

Defendants limit their argument regarding constructive fraud to

an assertion that the lack of a fiduciary relationship between

King and Bryant “indicates the events surrounding the execution

of the arbitration agreement did not involve constructive

fraud.” Because we are bound by the previous panel’s

determination that a fiduciary relationship did exist between

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pursuant to our opinion in King I, a rebuttable presumption

exists that King “put his trust and confidence in [Bryant] as a

matter of law,” and Defendants bear the burden of showing that

they acted openly, fairly, and honestly in bringing about the

transaction in this case. See King, __ N.C. App. at __, 737

S.E.2d at 809.

B. Unconscionability

Six years ago, in Tillman v. Commercial Credit Loans, Inc.,

our Supreme Court described the general unconscionability

defense to contract formation in the context of an arbitration

agreement as follows:

Arbitration is favored in North Carolina. As

with any contract, however, equity may

require invalidation of an arbitration

agreement that is unconscionable. A court

will find a contract to be unconscionable

only when the inequality of the bargain is

so manifest as to shock the judgment of a

person of common sense, and where the terms

are so oppressive that no reasonable person

would make them on the one hand, and no

honest and fair person would accept them on

the other.

An inquiry into unconscionability requires

that a court consider all the facts and

circumstances of a particular case, and if

the provisions are then viewed as so one-

sided that the contracting party is denied

the parties at the time King signed the agreement, Defendants’

argument as it pertains to constructive fraud is overruled.

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any opportunity for a meaningful choice, the

contract should be found unconscionable.

. . . .

[To be considered unconscionable, a contract

must be the result of] both procedural and

substantive unconscionability. . . .

. . . [P]rocedural unconscionability

involves “bargaining naughtiness” in the

form of unfair surprise, lack of meaningful

choice, and an inequality of bargaining

power. Substantive unconscionability, on the

other hand, refers to harsh, one-sided, and

oppressive contract terms. Of course,

unconscionability is ultimately a

determination made in light of a variety of

factors not unifiable into a formula.

Therefore, . . . while the presence of both

procedural and substantive problems is

necessary for an ultimate finding of

unconscionability, such a finding may be

appropriate when a contract presents

pronounced substantive unfairness and a

minimal degree of procedural unfairness, or

vice versa.

362 N.C. 93, 101–03, 655 S.E.2d 362, 369–70 (2008) (citations,

certain brackets, and certain internal quotation marks omitted;

emphasis added). The plaintiffs in Tillman were residents of

North Carolina with “limited financial resources” who had

applied for and received private, commercial loans from the

defendants. Id. at 94, 655 S.E.2d at 365. During the process of

contracting with the defendant loan companies, the plaintiffs

were sold loan insurance plans and agreed to resolve all

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disputes through binding arbitration under the Federal

Arbitration Act (“FAA”). Id. at 94–95, 655 S.E.2d at 365. The

plaintiffs later brought suit against the defendants on grounds

that they were improperly induced to purchase the insurance. Id.

at 96–97, 655 S.E.2d at 366. The defendants moved to compel

arbitration, and the case was eventually appealed to the Supreme

Court. Id.

On appeal, our Supreme Court held that the arbitration

clauses in the parties’ agreements was substantively

unconscionable because (1) the costs borrowers could face under

the clauses were prohibitively high; (2) the clauses were

drafted solely by the defendants and, thus, lacked mutuality;

and (3) the clauses prohibited the joinder of claims and class

actions. Id. at 104, 655 S.E.2d at 370–71. The “collective

effect” of these characteristics, the Court concluded, was “that

[the] plaintiffs [were] precluded from effectively vindicating

their rights in the arbitral forum.” Id. (citation, internal

quotation marks, brackets, and ellipsis omitted).

Since Tillman, the United States Supreme Court has issued

two important opinions on the use of state law to set aside an

arbitration agreement when that agreement is governed by the

FAA: AT&T Mobility v. Concepcion, __ U.S. __, 179 L. Ed. 2d 742

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(2011) (determining that the FAA preempted California’s judicial

rule prohibiting class waivers in consumer arbitration

agreements contained within contracts of adhesion) and American

Express Co. v. Italian Colors Rest., __ U.S. __, 186 L. Ed. 2d

417 (2013) (holding that the FAA does not permit courts to

invalidate an arbitration agreement on the grounds that it does

not permit class arbitration). This Court recently addressed

those opinions and their impact on Tillman in Torrence v.

Nationwide Budget Fin., __ N.C. App. __, 753 S.E.2d 802, disc.

review denied, __ N.C. __, __ S.E.2d __ (2014).

In Torrence, the plaintiffs applied for and received a

number of loans, each of which contained an arbitration clause.

Id. at __, 753 S.E.2d at 803. The clauses were drafted entirely

by the defendants; stipulated that arbitration would be governed

by the FAA; included an agreement not to bring, join, or

participate in a class action against the defendants; and

provided notice in bold, capital letters that the parties:

WOULD HAVE HAD A RIGHT OR OPPORTUNITY TO

LITIGATE DISPUTES THROUGH A COURT AND HAVE A

JUDGE OR JURY DECIDE THE DISPUTES BUT HAVE

AGREED INSTEAD TO RESOLVE DISPUTES THROUGH

BINDING ARBITRATION.

Id. at __, 753 S.E.2d at 804 (emphasis in original).

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Addressing the Supreme Court’s opinion in Concepcion, the

Torrence Court observed the following:

The Supreme Court held that [section 2 of

the FAA]3 permits arbitration agreements to

be declared unenforceable upon such grounds

as exist at law or in equity for the

revocation of any contract. This saving

clause permits agreements to arbitrate to be

invalidated by generally applicable contract

defenses, such as fraud, duress, and

unconscionability, but not by defenses that

apply only to arbitration or that derive

their meaning from the fact that an

agreement to arbitrate is at issue.

. . . [A]lthough [section] 2’s saving clause

preserves generally applicable contract

defenses, nothing in it suggests an intent

to preserve state-law rules that stand as an

obstacle to the accomplishment of the FAA’s

objectives. . . . [T]he FAA supersedes any

state law that sets aside arbitration

agreements or holds them to be

unconscionable upon grounds that are

exclusive to arbitration agreements.

3

Section 2 of the FAA provides that:

A written provision in any . . . contract

evidencing a transaction involving commerce

to settle by arbitration a controversy

thereafter arising out of such contract or

transaction . . . shall be valid,

irrevocable, and enforceable, save upon such

grounds as exist at law or in equity for the

revocation of any contract.

9 U.S.C. § 2 (2012).

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Id. at __, 753 S.E.2d at 809 (citations and internal quotation

marks omitted; emphasis added).

With regard to the impact of the Supreme Court’s opinions

in Concepcion and Italian Colors on Tillman, we stated that

“[w]hile both Concepcion and Italian Colors dealt with class

action waivers, underlying those decisions was a broader theme

that unconscionability attacks that are directed at the

arbitration process itself will no longer be tolerated.” Id. at

__, 753 S.E.2d at 811 (citation omitted; emphasis added).

Accordingly, we concluded that “the legal theories upon which

Tillman’s substantive unconscionability analysis is based have

been undermined by subsequent decisions of the United States

Supreme Court in the context of cases under the FAA.” Id. at __,

753 S.E.2d at 812. Specifically, we held that (1) the

“prohibitively high” cost factor is no longer applicable to an

unconscionability analysis; (2) an agreement’s lack of

mutuality, alone, is not sufficient to justify a finding of

substantive unconscionability; and (3) the prohibition of

joinder of claims and class actions does not render an

arbitration agreement unconscionable. Id. at __, 753 S.E.2d at

811–12.

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In this case, the FAA governs the parties’ arbitration

agreement. King I, __ N.C. App. at __, 737 S.E.2d at 806.

Therefore, to support the trial court’s determination that the

agreement is unconscionable, that determination must comport

with our Supreme Court’s general description of the elements of

unconscionability as laid out in Tillman, the objectives of the

FAA as addressed by the United States Supreme Court in

Concepcion and Italian Colors, and our application of those

cases to the unconscionability analysis as explained in

Torrence. After careful review, we conclude the trial court

correctly determined that the arbitration agreement here is

unconscionable.

i. Procedural Unconscionability

Defendants argue that the arbitration agreement did not

suffer from procedural unconscionability because evidence at the

hearing suggests that King was not “rushed to complete the

paperwork,” the agreement was prominently displayed as a

separate document, the language in the agreement was clear that

it was “not a precondition to receiving health care services,”

and King had more than a week to sign the agreement before

surgery. We are unpersuaded.

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First, we note that Defendants do not argue that they took

any active steps, in accordance with their fiduciary duty, to

make a “full, open disclosure of material facts” to King before

he signed the arbitration agreement. At most, they assert that

they did not hinder King’s ability to complete the paperwork and

that the agreement, on its own, was not so obfuscatory as to

render its presentation procedurally unconscionable. This is not

sufficient to meet their burden of showing that they acted

openly, fairly, and honestly in bringing about the transaction.

As such, the mere fact that King was not rushed to complete the

“pile” of documents he was asked to sign is not, in this case,

sufficient to show a lack of procedural unconscionability.

In addition, the fact that the agreement was displayed as a

separate document, with bold lettering at the top, and included

the language “not a precondition to receive medical services”

does not establish that the agreement was valid and enforceable.

As the trial court observed in its order,

[g]iven the fiduciary relationship between

the parties here, the complete absence of

any mention of waiver, of the judicial

process, of a trial, or of a jury in the

[arbitration a]greement, the failure of the

physician or any of his agents to explain

the waiver intended to be procured by the

[arbitration a]greement, and the

[arbitration a]greement’s convoluted

sentence structure and undefined legalistic

-24-

terms, this case involves evidence of

pronounced procedural unfairness.

In the waiting room on his first visit to Bryant, King was

presented with a “pile” of documents to sign, the majority of

which required him to include the usual and necessary medical,

insurance, and payment information. The arbitration agreement

was a part of that pile. The agreement itself lacked any

reference to the judicial process or King’s constitutional right

to a jury trial, omitting the words “jury,” “judge,” or “trial.”

The agreement did not define the term “arbitration” and included

a “convoluted” sentence at the end, which — among other things —

omitted the verb necessary to understand the meaning of the “not

a precondition to receive medical services” language. Given

Defendants’ fiduciary duty as well as the defects in the

presentation and language of the agreement, even accepting

arguendo that the agreement was “prominently displayed,”

Defendants have failed to establish that the agreement was not

procedurally unconscionable. Cf. Westmoreland v. High Point

Healthcare Inc., __ N.C. App. __, __, 721 S.E.2d 712, 718 (2012)

(concluding that an arbitration agreement was not procedurally

unconscionable when it advised the plaintiff of her right to

consult with an attorney, advised her of her right to receive an

explanation or clarification from staff, and provided that she

-25-

was not required to sign it in order for her father to be

admitted to the facility).

Lastly, the fact that King had “more than a week” before

surgery to review and sign the agreement does not save

Defendants’ argument. The trial court’s unchallenged findings of

fact state clearly that King was not given a copy of the

arbitration agreement to take with him when he went home. Thus,

even assuming this extra time would have affected the validity

of the agreement, King was not able to take advantage of it.

Given (1) the fact that we analyze the agreement here in

the context of the fiduciary duty Defendants owed King, (2) the

disparate levels of sophistication between the parties, (3) the

nature of the delivery of the agreement, and (4) Defendants’

burden because of their fiduciary duty to King to provide full

and open disclosure of the material facts surrounding the

transaction between the parties, we hold that the arbitration

agreement suffered from significant procedural

unconscionability. King did not have a meaningful choice between

whether to sign the agreement or not. Accordingly, Defendants’

argument is overruled.

ii. Substantive Unconscionability

-26-

Defendants argue that the arbitration agreement was not a

product of substantive unconscionability because the requirement

of at least one physician arbitrator is irrelevant to the issue

of unconscionability, citing a number of cases from other

jurisdictions. Defendants also assert that the agreement is not

unconscionable because arbitration is not prohibitively

expensive for Plaintiffs. Pursuant to our opinion in Torrence,

surpa, we agree with Defendants that the cost of arbitration and

the selection of a particular arbitrator is not relevant to the

issue of substantive unconscionability. Nonetheless, we conclude

that the particular terms of this contract evidence a lack of

substantive fairness which, when coupled with Defendants’

fiduciary duty, constitutes some evidence of substantive

unconscionability.

Here, unlike Torrence, the arbitration agreement includes

no reference to King’s right to litigate any future dispute in a

court of law. The agreement does not mention that King is

forfeiting his right to a jury or a judge. Moreover, the only

element of the agreement that attempts to communicate to the

would-be signor — here, King — that he is not required to accept

the agreement in order to see his physician is incomprehensible.

These failures result in a harsh, one-sided, and oppressive

-27-

instrument that is, at least in part, substantively

unconscionable. As a result, an order compelling arbitration

would preclude King from fully and effectively vindicating his

rights. Accordingly, we hold that the trial court did not err by

denying Defendants’ motion to compel arbitration on grounds that

the agreement is substantively unconscionable.

IV. Conclusion

As our Supreme Court stated in Tillman and this Court

reiterated in Torrence, an ultimate finding of unconscionability

may be made when the contract presents a pronounced measure of

procedural unfairness and only a minimal degree of substantive

unfairness or vice versa. Tillman, 362 N.C. at 103, 655 S.E.2d

at 370; Torrence, __ N.C. App. at __, 753 S.E.2d at 807.

Numerically speaking, a contract may be considered

unconscionable when it suffers from even 99% procedural

unconscionability and only 1% substantive unconscionability or

vice versa. See Tillman, 362 N.C. at 103, 655 S.E.2d at 370;

Torrence, __ N.C. App. at __, 753 S.E.2d at 807. Here, King

signed the agreement pursuant to a pronounced measure of

procedural unconscionability and an adequate measure of

substantive unconscionability. This is sufficient to support an

ultimate finding of unconscionability.

-28-

We also point out that, unlike the arbitration agreements

in Tillman, Concepcion, Italian Colors, and Torrence, this

agreement is unconscionable because of Defendants’ failure to

properly prepare and present the arbitration agreement to King

in the context of their confidential, physician-patient,

fiduciary relationship. If the agreement had included suitable

notice provisions and Defendants had satisfied their duty to

affirmatively disclose all facts material to the transaction,

the arbitration agreement would have been enforceable. Thus, our

application of the unconscionability defense in this case is not

a broad condemnation of arbitration agreements in general, the

arbitration process itself, or arbitration agreements employed

in the physician-patient context. Indeed, we acknowledge the

strong public policy in favor of arbitration under North

Carolina law and the FAA. Nonetheless, we must conclude that in

the limited factual circumstances presented here, Defendants

submitted an agreement to King that was unconscionable by its

terms — or lack thereof — and the manner of its presentation,

eliminating any meaningful choice on the part of King.

Therefore, under section 2 of the FAA and our State’s general

contract formation defense of unconscionability, we hold that

-29-

the arbitration agreement is invalid. Accordingly, the trial

court’s order is affirmed.4

AFFIRMED.

Judges HUNTER, ROBERT C., and STEELMAN concur.

Report per Rule 30(e).

4

Because we affirm the trial court’s order denying Defendants’

motion to compel arbitration, we need not determine whether the

arbitration agreement is applicable to O’Neal.