Attorney fee provision was unconscionable

Where an attorneys’ fee provision in a private school enrollment contract obligated the signer to pay all attorney’s fees and costs in any action arising from the contract, the provision is unconscionable and will not be enforced.

“The Enrollment Contract is a classic example of an adhesion contract.”

Overview

Alessia and Roger McIntosh signed an enrollment contract for their minor child with Flint Hill School. The contract provided, in part, that “We (I) agree to pay all attorneys’ fees and costs incurred by Flint Hill School in any action arising out of or relating to this Enrollment Contract.”

Later, Alessia sued the school, seeking a declaratory judgment regarding whether the school could enforce the attorneys’ fee provision. Alessia claimed that “she wished to assert a claim against the School regarding harm to her child at the School, but that the uncertainty concerning the enforceability of the contested attorneys’ fees clause served as a practical bar to the claim she wished to bring, because of the potential financial liability that the clause might impose upon her.”

The circuit court concluded that, contrary to the school’s argument, that the court had jurisdiction, that Roger was not a necessary party to the case, and that the fee provision was unconscionable and unenforceable. The school appealed.

Jurisdiction

“We find there is an actual controversy appropriate for declaratory judgment in the present case because the contested attorneys’ fees provision has created a threat of imposition of liability for the School’s attorneys’ fees and costs if Alessia files and maintains a cause of action against the School for the injury she claims that her child already suffered as a student there. It is transparent that the alleged injury is related to the Enrollment Contract. Alessia and the School disagree concerning the enforceability of the attorneys’ fees provision. That controversy concerns rights under the Enrollment Contract.

“This case is highly unusual because a specific and anomalous clause of the contract, if applied as written, would have the practical effect of foreclosing litigation on the contract itself. The parties’ rights under the contract will be affected by the outcome of the declaratory judgment action. The actual objective in the declaratory judgment proceeding is not the resolution of the issue, arising out of and related to the Enrollment Contract, of whether Alessia’s child was actually harmed by the actions of the School, but rather an adjudication of the parties’ rights under the contract regarding the payment of attorneys’ fees if that lawsuit is filed.

“Moreover, the claim asserted concerning attorneys’ fees has not fully matured and the alleged wrong has not already been suffered, so a declaratory judgment proceeding, which is intended to permit declaration of rights before they mature, is an available remedy.

Necessary party

“The School argues that because Roger is also a signatory to the Enrollment Contract, that he is a necessary party to Alessia’s declaratory judgment action.” We disagree.

“Alessia’s declaratory judgment action related to a contract provision in the Enrollment Contract, which Roger happened to also sign, but, Roger is not a necessary party because his interest or claim was not likely to be either ‘diminished or defeated’ by Alessia’s claim. Alessia and Roger each had individual rights and obligations under the Enrollment Contract. …

“The remedy for a necessary party’s absence in a case is not to dismiss the claim, but instead to add the necessary party. If the School believes it is in any way prejudiced by not having Roger joined as a party, it had the opportunity to move to add Roger in the circuit court, but elected not to do so.”

Adhesion contract

“The School argues that the attorneys’ fees provision is not unconscionable because any attorneys’ fees would be limited by reasonableness. The School explains that this means that a court could determine its reasonable attorneys’ fees to be zero dollars, which in turn means Alessia would not have to pay anything for its attorneys’ fees. …

“In determining whether a contractual provision is unconscionable, a relevant factor to consider is whether the contract was an adhesion contract. … The Enrollment Contract is a classic example of an adhesion contract. The School prepared the contract and presented it to Alessia and Roger for their signatures. While Alessia had time to read the contract in its entirety before signing, she did not have any meaningful choice regarding the terms.

“The School’s assertion that the provision is not unconscionable because any attorneys’ fees will be limited by reasonableness fails because the School misunderstands the issue. The issue is not whether the amount of attorneys’ fees would be unconscionable; the issue is whether the obligation to pay the School’s attorneys’ fees as stated in the provision is unconscionable. We find that it is and that the circuit court did not err in ruling that the provision is void and unenforceable.

“No one with his or her senses ‘and not under delusion’ would agree to this particular attorneys’ fees provision because it is overly broad. It requires the signatory to pay ‘all attorneys’ fees and costs incurred by [the School] in any action arising out of or relating to’ the Enrollment Contract.

“Placing the burden of attorneys’ fees for the School on the signatories, especially stated so broadly, creates an inequality so gross that it shocks the conscience. Especially considering … the signatories (the parents of students) would have to pay the School’s attorneys’ fees even if the School was the one to initiate a proceeding eventually found to be without merit.”

Affirmed.

Flint Hill School v. McIntosh, Record No. 181678 (Order) Jan. 2, 2020, Fairfax Cir. Ct.  Timothy Brooks Hyland, Elizabeth Ann Dwyer Tyler Southwick for Appellant, Harris Dewey Butler III, Cyrus Mehri for Appellee. VLW 020-6-001, 9 pp.