News

There's a new flurry of litigation over mandatory arbitration provisions in nursing home admissions contracts.

"There's a ton of litigation. It's a fairly rapid and recent development," said Paul Bland of Public Justice in Washington D.C., who receives two to three calls per week from plaintiffs' attorneys attempting to challenge arbitration clauses in nursing home agreements.

Nursing homes have made a big push in the past two years to require new patients to sign arbitration clauses waiving their right to a jury trial, and courts are now being asked to decide if those provisions are enforceable, said David Couch, an attorney in Little Rock, Ark., and the chair of the nursing home litigation section of the American Association of Justice.

Many of the same arguments over mandatory arbitration in other contexts apply to nursing homes. Providers say they help reduce litigation and insurance costs, while consumer advocates say that the furthest thing from a patient's mind when entering a nursing home is whether he or she has the right to sue in court.

However, nursing home cases also have unique aspects that distinguish them: patients are elderly and often mentally fragile or heavily medicated, and frequently someone other than the patient signs the contract to admit him or her.

New legal arguments

Although courts generally uphold mandatory arbitration provisions under the Federal Arbitration Act, procedural unconscionability arguments can be more powerful in nursing home cases.

"I've seen more [nursing home] cases in which courts have not enforced arbitration agreements than in any other setting," said Bland.

This is both because nursing home plaintiffs are a vulnerable population and because nursing homes have been very aggressive about imposing mandatory arbitration clauses on their patients, he said.

In the past, nursing homes overreached, burying their arbitration clauses in small print and limiting damages or discovery.

But nursing homes have learned from earlier court decisions and are now more careful about drafting their arbitration provisions, said Eric Carlson, an attorney and director of the long-term care project of the National Senior Citizens Law Center in Los Angeles.

Nursing home arbitration provisions are now often in bold print, require separate initialing and include a 7-day opt-out provision in an effort to make them "voluntary," Couch said.

The legal arguments have evolved as well.

The more recent cases involve questions of procedural unconscionability and the authority to bind the patient.

"To the extent that nursing homes are forming contracts with people who are very vulnerable, the unconscionability argument is easier," said Bland.

But because unconscionability is a fact-specific determination, there is no clear trend, Carlson said, although a handful of courts recently struck down terms within arbitration agreements, but then upheld the agreements after severing those terms.

Another evolving area of litigation is whether a relative, spouse or health care agent has the authority to sign a mandatory arbitration agreement for the patient.

"There are a lot of unusual legal issues that pop up because a lot of patients are signed in by someone who doesn't have the authority" to sign away their right to a jury trial, said Bland.

Courts, however, are all over the map on this issue.

The outcome depends on state agency law and the scope of authority possessed by a surrogate or health care agent, said Carlson.

Some courts, for example, have held that an agent's job of making "health care decisions" includes signing an arbitration provision, while others have said that signing a waiver of a jury trial is a legal decision, not a health care decision.

One court ruled that where an arbitration agreement was voluntary, this was a separate decision from the decision to enter the nursing home and therefore was not a "health care decision," Carlson noted.

In many cases, a general durable power of attorney, rather than a health care proxy, is at play, said Couch.

As a prevention strategy, he has begun asking estate planning lawyers to take care in drafting powers of attorney.

"I tell all estate planners when preparing a power of attorney to put in a clause explicitly limiting someone's power to enter into a mandatory arbitration agreement," said Couch.

Recent cases

Here's a look at some recent cases involving mandatory arbitration agreements in nursing home contracts that illustrate some of the common legal arguments on the issue:

Authority

• When an arbitration agreement stated it was not a precondition to admission to a nursing home, signing it was not a "health care decision" by a health care surrogate, and the patient can sue in court for wrongful death. (Mississippi Care Center of Greenville v. Hinyab, No. 2005-CA-01239 (Miss. 2008).)

• A wife didn't have the authority to sign an arbitration agreement for her husband where she had not been given power of attorney or guardianship and the husband was not incapacitated and was able to sign the agreement himself. (Sikes v. Heritage Oaks West Retirement Village, 238 S.W.3d 807 (Tex. App. 2007).)

• A husband did not have the authority to sign an arbitration agreement for a wife suffering from dementia who had given no express or implied consent for him to act as her agent. (Warfield v. Summerville Senior Living, Inc., 158 Cal. App.4th 443 (Cal.App. 2007).)

• A wife's history of acting on behalf of and making decisions for her husband constituted circumstantial evidence that the wife was the husband's agent for purposes of signing an arbitration agreement. (Ruesga v. Kindred Nursing Centers West LLC, 215 Ariz. 589 (Ariz.App. 2007).)

• A nursing home patient with dementia was bound by her mother's signing of an arbitration agreement. (J.P. Morgan Chase & Co. v. Conegie ex rel. Lee, 492 F.3d 596 (5th Cir. 2007).)

Power of attorney

• Although a son had a durable power of attorney, this did not give him the authority to bind his mother to arbitration when admitting her to an assisted living facility, where the mother was not incapacitated and did not sign the agreement herself. (In re Estate of McKibbin v. Alterra Health Care Corp., No. 2D06-5452 (Fla. Ct. App. 2008).)

• A durable power of attorney for health care decisions includes the authority for the agent to enter into an arbitration agreement as part of a nursing facility admission agreement. (Owens v. National Health Corp., No. M2005-01272-SC-R11-CV (Tenn. 2007).)

Unconscionability

• Although an arbitration clause was substantively unconscionable, a nursing home patient could not prove procedural unconscionability where she was 70 years old and handled her own business affairs. (Fortune v. Castle Nursing Homes Inc., No. 07-CA-001 (Ohio Ct. App. 2007).)

Severability

• A court struck down several unconscionable provisions (including a limitation of damages clause, a one-sided choice of forum and copying charges of $3 per page) but upheld the remaining arbitration provision. (Trinity Mission Health & Rehabilitation of Clinton v. Estate of Scott, No. 2006-CA-01053-COA (Miss. Ct. App. 2008).)

• A court refused to uphold arbitration by severing the clause that designated an arbitrator whose rules carry a higher burden of proof than state law, even though the contract contained a severability clause. (The Place at Vero Beach Inc. v. Hanson, 953 So.2d 773 (Fla. Ct. App. 2007).)