Cornelius v. Alpha Kappa Lambda

• Decision Date: 08 November 2021
• Docket Number: 82264-1-I
• Citation: 502 P.3d 910
• Parties: Austin CORNELIUS, an individual, Respondent, v. ALPHA KAPPA LAMBDA, a national organization, Eta Chapter of Alpha Kappa Lambda, a Washington corporation d/b/a Alpha Kappa Lambda, and Eta of Alpha Kappa Lambda, a Washington corporation, Appellants, Washington State University, a public university, Defendant.
• Court: Washington Court of Appeals

502 P.3d 910

Austin CORNELIUS, an individual, Respondent,

v. ALPHA KAPPA LAMBDA, a national organization, Eta Chapter of Alpha Kappa Lambda, a Washington corporation d/b/a Alpha Kappa Lambda, and Eta of Alpha Kappa Lambda, a Washington corporation, Appellants,Washington State University, a public university, Defendant.

No. 82264-1-I

Court of Appeals of Washington, Division 1.

FILED November 8, 2021

Ordered Published Date January 20, 2022

Jeffrey W Daly, Preg O'Donnell & Gillett PLLC, 901 5th Ave. Ste. 3400, Seattle, WA, 98164-2026, Michael Osborne, Jaskiran Samra, 611 Gateway Blvd. Suite 233, South San Francisco, CA, 94080, for Appellants.

John Robert Connelly Jr., Samuel J. Daheim, Connelly Law Offices, 2301 N 30th St., Tacoma, WA, 98403-3322, Jay Herman Krulewitch, Jay H. Krulewitch Atty. At Law, P.O. Box 33546, Seattle, WA, 98133-0546, for Respondent.

Timothy E. Allen, Washington Attorney General's Office, To., 800 Fifth Ave. Ste. 2000, Seattle, WA, 98104-3188, Amanda Dawn Daylong, Francis Stanley Floyd, Floyd, Pflueger & Ringer, P.S., 200 W Thomas St. Ste. 500, Seattle, WA, 98119-4296, Mark Augustus Thompson, Michael Kazuo Rhodes, Mix Sanders Thompson PLLC, 1420 5th Ave. Ste. 2200, Seattle, WA, 98101-1346, for Other Parties.

PUBLISHED OPINION

Chun, J.

¶1 Austin Cornelius sued the national fraternity Alpha Kappa Lambda and its local chapter, Eta of Alpha Kappa Lambda, (collectively "AKL") for negligence. AKL moved to compel arbitration under an arbitration agreement (the Agreement) Cornelius signed when he joined the fraternity. The trial court denied the motion, deeming the Agreement procedurally unconscionable. AKL appeals, contending that the Agreement is not procedurally unconscionable and covers all of Cornelius's claims. In the alternative, AKL requests remand for an evidentiary hearing and limited discovery on the circumstances surrounding the execution of the Agreement. For the reasons discussed below, we reverse and remand, and the trial court may address whether to allow any limited discovery.

I. BACKGROUND

¶2 Cornelius began attending Washington State University (WSU) in August 2017 when he was 18 years old. He participated in "rush week" and received "bids"—or invitations to join—from at least five fraternities. He decided to "pledge" Alpha Kappa Lambda, a national fraternity with a local chapter, Eta, at WSU.

¶3 Cornelius attended his first AKL event on August 20, 2017. He alleges that AKL members hazed him during this event, leading to his hospitalization for "acute alcohol intoxication."

¶4 As for the arbitration agreement at issue, Cornelius claims as follows: On August 28, 2017, during a fraternity study session, AKL members instructed him to create a profile on the fraternity's online membership portal. He did so. On August 30, 2017, during another study session, AKL members directed Cornelius to "sign off" on "some paperwork" on the online portal. The pledges "were rushed through this process and told [they] needed to complete the approval right there at the study tables session before [they] left for the evening." The senior members "never [gave] any explanation as to what specifically [the pledges] were signing, what the agreements entailed, or even a summary of what was contained in the agreements." The pledges "were not told or encouraged to spend more than about a minute or two at most to review the agreements before checking the box." The senior members told the pledges that if they did not "sign off" on the agreements, they "could not pledge the fraternity and would not be allowed at the house." "There was no opportunity to ask questions, seek clarity, review, or otherwise get a meaningful understanding of what it was [the pledges] were being asked to approve."

¶5 The portal contained a four-page document called the "New Member Agreements" (NMA). On the last page of the NMA is the Agreement, which is titled "AKL CLAIM AND DISPUTE RESOLUTION PROGRAM" in bold lettering. It includes the following provision: "If you are unable to resolve a claim or dispute arising out of your membership or participation in any Fraternity of Alpha Kappa Lambda-related activity, under the terms of the Program the claim or dispute will be submitted to binding arbitration instead of through the courts. " (Emphasis added.) The Agreement then provides in bold lettering:

YOUR DECISION TO JOIN OR ACCEPT MEMBERSHIP OR CONTINUE YOUR CURRENT MEMBERSHIP IN THE FRATERNITY ... MEANS YOU HAVE AGREED TO AND ARE BOUND BY THE TERMS OF THIS PROGRAM AS CONTAINED IN THE PLAN DOCUMENT AND RULES, A COMPLETE COPY OF WHICH IS AVAILABLE FOR YOU TODAY, AND CAN BE FOUND ON THE ALPHA KAPPA LAMBDA NATIONAL WEBSITE.

Finally, the Agreement provides,

[Y]ou and the Fraternity of Alpha Kappa Lambda are both waiving all rights which either may have with regard to trial by jury for personal injury, property damage, contract or any other related matters in state or federal court. This Plan covers any legal or equitable claim for personal injury, property damage, equity or breach of contract, arising out of any tort, statute, contract or law.

(Emphasis added.) The Agreement incorporates the "Claim and Dispute Resolution Plan and Rules" (the Plan) by reference and informs that the Plan is available on the fraternity's website. The Plan provides that the Federal Arbitration Act¹ (FAA) applies to the Agreement.

¶6 Cornelius signed the NMA on August 30. The online portal provider's records show that Cornelius created his profile on August 28, 2017. It also shows that he logged onto his profile around 11:20 p.m. on August 30 and signed the NMA around 11:32 p.m. the same night. AKL allegedly continued to haze Cornelius as a pledge until October 2017.

¶7 On July 30, 2020, Cornelius sued AKL for negligence. AKL moved to compel arbitration and for a stay of proceedings. Cornelius opposed the motion, claiming that the Agreement does not apply to claims arising from events predating its execution and that the Agreement is procedurally unconscionable. During a hearing on the matter, AKL requested an evidentiary hearing in the alternative. The trial court denied AKL's motion to compel arbitration. It determined that an evidentiary hearing was unnecessary and concluded that the Agreement was procedurally unconscionable because Cornelius lacked a "meaningful choice regarding his entry into the agreement." AKL appeals.

II. ANALYSIS

¶8 AKL says the trial court erred by denying its motion to compel arbitration because the Agreement is not procedurally unconscionable and covers the claims arising from events before the execution of the Agreement.² Cornelius responds that the Agreement is procedurally unconscionable and does not apply retroactively to all of his claims. Because we cannot resolve the issue of procedural unconscionability on the record before us, we remand for an evidentiary hearing.

¶9 We review de novo a trial court's denial of arbitration.

Burnett v. Pagliacci Pizza, Inc., 196 Wash.2d 38, 46–47, 470 P.3d 486 (2020). "Unconscionability is also a question of law we review de novo." McKee v. AT&T Corp., 164 Wash.2d 372, 383, 191 P.3d 845 (2008).

¶10 "[T]he party moving to compel arbitration must make a threshold showing that a written agreement to arbitrate exists and that the contract at issue involves interstate commerce."³ Walters v. A.A.A. Waterproofing, Inc., 120 Wash. App. 354, 358, 85 P.3d 389 (2004), review granted, cause remanded, 153 Wash.2d 1023, 108 P.3d 1227 (2005). Once that party meets that threshold, the burden shifts to the party opposing arbitration "to show that the arbitration clause is unenforceable." Gandee v. LDL Freedom Enters., Inc., 176 Wash.2d 598, 602–03, 293 P.3d 1197 (2013).

¶11 The parties do not dispute that the FAA governs here. The FAA provides that written arbitration agreements "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. "When the validity of an agreement to arbitrate is challenged, courts apply ordinary state contract law." McKee, 164 Wash.2d at 383, 191 P.3d 845. "General contract defenses such as unconscionability may invalidate arbitration agreements." Id.; see also Volt Info. Scis., Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468, 475–76, 109 S. Ct. 1248, 103 L. Ed. 2d 488 (1989) ("in applying general state-law principles of contract interpretation to the interpretation of an arbitration agreement within the scope of the Act, due regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in favor of arbitration." (citations omitted)). "[B]oth state and federal law strongly favor arbitration and require all presumptions to be made in favor of arbitration." Gandee, 176 Wash.2d at 602–03, 293 P.3d 1197. When reviewing a motion to compel arbitration, we consider "(1) ‘whether the arbitration agreement is valid,’ and (2) ‘whether the agreement encompasses the claims asserted.’ " Cox v. Kroger Co., 2 Wash. App. 2d 395, 404, 409 P.3d 1191 (2018) (quoting Wiese v. CACH, LLC, 189 Wash. App. 466, 474, 358 P.3d 1213 (2015) ).

A. Procedural Unconscionability

¶12 "Procedural unconscionability is ‘the lack of meaningful choice, considering all the circumstances surrounding the transaction.’ " Zuver v. Airtouch Commc'ns, Inc., 153 Wash.2d 293, 303, 103 P.3d 753 (2004) (quoting Nelson v. McGoldrick, 127 Wash.2d 124, 131, 896 P.2d 1258 (1995) ). To determine whether an agreement is procedurally unconscionable, courts look at "(1) the manner in which the contract was entered, (2) whether [the signatory] had a reasonable opportunity to understand the terms of the contract, and (3) whether the important terms were hidden in a maze of fine print." Burnett, 196 Wash.2d at 54, 470 P.3d 486. " ‘[T]hese three factors [should] not be applied mechanically without regard to whether in truth a meaningful choice existed.’ " Zuver, 153 Wash.2d at...