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Nursing Home Arbitration Agreements Deemed Invalid

An arbitration agreement is an incredibly common provision contained in all kinds of contracts related to business, employment, and so much more. States across the continent honor arbitration agreements in some way. Such agreements manifest a compact between parties to a contract that if there is a dispute relating to the terms of the contract in any way, and one party seeks to litigate the matter with the other or others, that case will be arbitrated rather than brought in court. Litigation in general can be an incredibly time-consuming event and even more so can be extremely costly.

While arbitration itself incurs costs, it will typically be less expensive than an actual court trial. Arbitration is a type of alternative dispute resolution, which can also include negotiation, mediation, and others. It involves evidence and testimony as to the incident that occurred such as physical abuse, verbal abuse, sexual abuse, or other neglect similar to a trial, but carries its own distinct procedural rules and tends to be more streamlined in avoiding the often stalled calendar of a courthouse. The decision of an arbitrator or an arbitration panel is typically binding on the parties. There has been precedent for courts to invalidate the arbitration agreement provision of a contract, namely where it is against public policy or deemed unconscionable (or in essence, both).

In the Nursing Home Context

In the nursing home arena, nursing home facilities often include arbitration agreements as part of contracts with their patients. In order for an individual to enter the nursing home, they or their family must sign off that they will agree to arbitrate any claims as opposed to take them through the court system. However, as recently reported, courts have been nullifying arbitration agreements as unconscionable because they tend to make cases highly one-sided in favor of the nursing homes or nursing home operators. That one-sidedness effectively means the arbitration agreement violated public policy.

An article on the matter cites a Pennsylvania state court case that found an arbitration provision in a nursing home contract to be both “misleading” and “overreaching.” The rationale for this is that patients or their families, who end up being the plaintiffs later on in cases against the nursing home provider, do not completely understand that they are giving up access to the court system in favor of a process they also do not understand. Jury trials are a constitutional right in most cases, and an agreement to arbitrate effectively waives that right, although the patient/family may not understand that. The court in the Pennsylvania case noted how the plaintiff effectively “lacked informed consent” when agreeing to arbitration. It is also important to note that while not weighing in on arbitration clauses in simple monetary and business transactions, the court observed that either intentional or negligent torts should not have to go to arbitration unless the parties truly understand and agree to that process. Thus when the nursing home in that case pointed to the arbitration agreement in the contract, the court said it would not recognize the agreement.

As the article goes on to note, the Florida Supreme Court in 2011 nullified parts of a nursing home arbitration agreement, including provisions that capped any possible damages at $250,000. Such a cap was deemed against public policy in Florida. A New Mexico court also found an arbitration agreement to be too one-sided and thus invalid. Ultimately this is a trend that will be interesting to observe over time, and its progression could be incredibly important for plaintiffs and their families, and their constitutional rights to bring claims and seek justice in U.S. and state courts.

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