In February 2012, the U.S. Supreme Court, in Marmet Health Care Center v. Brown et al., paved the way for long-term care facilities across the country to amend their admission agreements to provide that all disputes be resolved by binding arbitration. These facilities stood to benefit from resolving disputes at arbitration on the basis of facts or complex medical issues and without the sympathy factor often encountered with juries. From an economic standpoint, arbitration is a cost-effective and efficient means of resolving disputes while lawsuits can take years to resolve, driving up costs for defendants and plaintiffs alike.
Recently, journals and newspapers have expressed outrage over the concept of forcing people who enter a nursing home to waive their right to a jury trial, seemingly based on the presumption that nursing homes take advantage of the elderly who have diminished mental capacity by hiding or concealing an arbitration clause in an already complex document. It has even been suggested that family members of the proposed residents are too distraught to read or even understand the documents they are signing.
Opponents fail to realize that enforcement of any contract hinges on the signatory possessing the mental capacity to enter into the contract and having the legal authority to bind themselves and potential third parties to its terms.
The Federal Arbitration Act (FAA) was intended to promote swifter and more economical resolutions of lawsuits. In Marmet, the Supreme Court declared that the FAA preempts any state law (even public policy) that says arbitration cannot be used to resolve personal injury lawsuits. There is nothing in the legislative intent or language of the FAA that suggests its application is limited to non-personal injury suits.
Hence, a nursing home admission agreement, like any other contract, is no less enforceable if it contains an arbitration agreement. The party moving to enforce arbitration must establish certain federal procedural criteria and demonstrate that the contract is procedurally and substantively conscionable. The contract cannot be one of adhesion; there must be equal bargaining power on both sides; and the parties entering into the contract must have the capacity to do so.
CASE STUDY
In New York, my firm in 2015 had the opportunity to be the first to test an arbitration provision in a nursing home admission agreement. In Friedman v. Hebrew Home for the Aged at Riverdale, Mr. Friedman, with his mother”™s power of attorney, brought suit when his mother fell and fractured her hip. On her admission to the facility, her son , who happens to be an attorney, signed the admission agreement in every place where a signature was required and in each instance identified himself as possessor of the power of attorney.
Following the arbitration clause and just above the signature line was another statement: “By executing this agreement, the undersigned acknowledge that he/she/they are waiving the right to a trial by jury or a judge in a court of law and have instead agreed to binding arbitration.”
In opposition to Wilson Elser”™s motion to compel arbitration, the plaintiff argued, among other things, that the provision was buried among other documents that most people do not read at a time when stressors are high. The lower court judge declined to compel arbitration on a technicality. However, on appeal, the First Judicial Department unanimously ruled that the agreement was enforceable and was neither procedurally nor substantively unconscionable.
Subsequent motions to compel arbitration that followed were faced with arguments concerning the resident”™s mental capacity or the authority of the family to bind the resident or others in a wrongful death suit:
- On the issue of capacity, New York State law affords every individual the presumption of capacity, shifting the burden to the opponent to prove otherwise. Indeed, one would expect that every person admitted to a long-term care facility would prefer such a presumption rather than the alternative that they are incapable of making any decisions for themselves.
- In the instances when a resident has designated a family member as power of attorney or a health care proxy, the arbitration agreement is not automatically enforceable either. The party enforcing the provision must still establish that the person who signed the agreement had the legal authority to bind the resident and the resident”™s heirs in a wrongful death claim to the waiver of the right to a jury trial.
Florida, New Mexico, California, Texas, Mississippi, Alabama and Michigan have ruled that a resident”™s signature on an admission agreement can bind his or her heirs to arbitration of their wrongful death suit. Arizona, Pennsylvania, Kentucky, Illinois, Washington, Missouri, Utah and Ohio hold otherwise. New York has yet to address the issue, though I highly suspect it will.
Lori Semlies is a partner in the New York Metro offices of Wilson Elser Moskowitz Edelman & Dicker LLP. She focuses her practice on the defense of medical and nursing home malpractice claims in both state and federal courts, including all phases of litigation through trial.
