M E D I C A L L I A B I L I T Y A N D H E A LT H C A R E L A WTypical ComplicationsBy Brad W. Smith,W. Davis Fryeand Brad C. MoodyEnforcing ArbitrationAgreements in Long-Term Care LitigationPublic policyconsiderations, residentstatus as third-partybeneficiary, and FAAapplication are a few of thelegal arguments availableto compel arbitration.Although courts in many jurisdictions will enforce validand binding agreements to arbitrate between nursinghomes and their residents, it has become increasingly difficultto enforce an arbitration agreement when a contract■ W. Davis Frye and Bradley W. Smith areshareholders, and Brad C. Moody is anassociate, in the Jackson, Mississippi, officeof Baker, Donelson, Bearman, Caldwell &Berkowitz. Mr. Frye’s practice includes nursinghome litigation, medical negligenceclaims, and health care litigation. Mr. Smithhas experience defending professionalliability matters for physicians,hospitals and long-term care facilities.Mr. Moody’s practice focuseson health care and medical malpracticelitigation as well as commerciallitigation.was signed by someone other than the resident.An arbitration agreement’s enforceabilityis often complicated by the typicaladmissions process story. A family memberis riddled with guilt and anxiety aboutleaving a loved one in a nursing home. <strong>The</strong>admission paperwork is complicated andtedious, and the family member is distractedby concern for the resident whois confused by new surroundings and theblaring television of a new roommate. Afteran hour spent signing financial documents,the admission coordinator pushes an arbitrationagreement across the table andexplains that the optional agreement constitutesa waiver of the right to a jury trial.Not wanting to offend the nursing home’sstaff, the family member signs the agreementto avoid the embarrassment of askingthe meaning of the word “arbitration.”Six years later, the nursing home’s defenselawyer must petition a court to enforcethe arbitration agreement. However,at this time, the defense lawyer discoversthat the signing party did not have power ofattorney over the resident, no court authorizedthe signing party to act on behalf ofthe resident, no physician determined thatthe resident lacked the capacity to sign theagreement, and the forum specified in thearbitration agreement is no longer arbitratingmalpractice claims. Although this scenariomay result in a fast track to a trial byjury, the defense attorney can make somepractical arguments that may increase thelikelihood that a court will enforce theagreement and compel arbitration.<strong>The</strong> Legal Framework for EnforcingArbitration AgreementsBefore examining the practical argumentsthat may increase the likelihood that a courtwill enforce an arbitration agreement, it isimportant to understand the general frameworkfor enforcing arbitration agreements.Because arbitration provisions are contrac-52 n <strong>For</strong> <strong>The</strong> <strong>Defense</strong> n <strong>July</strong> <strong>2010</strong>
tual in nature their construction is a matterof contract interpretation. See, e.g., Seifertv. U.S. Home Corp., 750 So. 2d 633, 636(Fla. 1999). In many jurisdictions, to determinethe validity of a motion to compelarbitration, a court will analyze the factsto determine whether (1) a valid arbitrationagreement exists between the parties,(2) the parties’ dispute is within the scope ofthe arbitration agreement, and (3) the partyseeking to enforce an arbitration agreementhas waived the right to arbitrate. See, e.g.,Cmty. Care Ctr. of Vicksburg v. Mason, 966So. 2d 220, 225 (Miss. Ct. App. 2007); Blandex rel. Coker v. Health Care & RetirementCorp. of America, 927 So. 2d 252, 255 (Fla.Dist. Ct. App. 2006).When determining if a valid arbitrationagreement exists, courts will consider ordinaryprinciples of contract law to analyzewhether legal constraints external to theparties’ agreement foreclose arbitration ofthose claims. In re Kellogg Brown & Root,Inc., 166 S.W.3d 732, 738 (Tex. 2005). Inthis analysis, generally applicable contractdefenses, such as fraud, duress, and unconscionability,are frequently used to invalidatean arbitration agreement. See, e.g., Hillv. NHC Healthcare/Nashville, LLC, 2008WL 1901198, at *6 (Tenn. Ct. App. 2008).Additionally, whether a particular disputefalls within the scope of an arbitrationagreement depends wholly on the terms ofthe contract. Although courts will considerthe intent of the parties as manifested bythe terms of the contract and construe arbitrationagreements as broadly as the partiesobviously intended, they will likewisedeny a request for arbitration if the disputeis not contemplated by the terms of theagreement. Constantino v. Frechette, 897N.E. 2d 1262, 1265 (Mass. App. Ct. 2008).Finally, courts will consider whether anursing home has waived its right to arbitrateby failing to move timely to compel arbitrationor by actively participating in thelitigation process. See Pine Tree Villa, LLC v.Olson, 2009 WL 723034, at *2 (Ky. Ct. App.2009). In this analysis, courts will focus ona nursing home’s conduct before filing itsmotion to compel to determine whether itsactions, such as serving discovery or filingmotions without raising the right to arbitrate,are inconsistent with arbitration. SeeAlgayer v. Health Ctr. of Panama City, 866So. 2d 75, 77 (Fla. Dist. Ct. App. 2003).Framing the Public Policy ArgumentTo properly frame an argument in supportof arbitration, remember that public policyfavors arbitration as a means of dispute resolution.In fact, when analyzing arbitrationagreements between nursing homes andresidents, courts routinely cite the FederalArbitration Act (FAA) and the public policyfavoring arbitration. See, e.g., VicksburgPartners, LP v. Stephens, 911 So. 2d 507, 515(Miss. 2005), overruled on other grounds byCovenant Health & Rehab. of Picayune, LPv. Estate of Moulds ex rel. Braddock, 14 So.3d 695 (Miss. 2009).<strong>The</strong> FAA provides that “[a] written provisionin… a contract or transaction… tosettle by arbitration a controversy thereafterarising out of such contract… shall be valid,irrevocable and enforceable, save upon suchgrounds as exist at law or in equity for therevocation of any contract.” 9 U.S.C. §2(2006). In enacting the FAA, “Congress declareda national policy favoring arbitrationand withdrew the power of the statesto require a judicial forum for the resolutionof claims which the contracting partiesagreed to resolve by arbitration.” SouthlandCorp. v. Keating, 465 U.S. 1, 10 (1984). BecauseCongress derived its power to enactthe FAA from the Commerce Clause of theConstitution, the underlying admissionsagreement at issue must involve interstatecommerce for the FAA to apply. See TerminixInt’l, Inc. v. Rice, 904 So. 2d 1051, 1054(Miss. 2004). In many jurisdictions, it issettled that a nursing home admissionsagreement affects interstate commerce.See McGuffey Health & Rehab. Ctr. v. Gibson,864 So. 2d 1061, 1063 (Ala. 2003) (holdingthat “the [nursing home] admission[s]agreement had a substantial effect on interstatecommerce”); In re Nexion Health atHumble, Inc., 173 S.W.3d 67, 69 (Tex. 2005)(“because ‘commerce’ is broadly construed,the evidence of Medicare payments [to thefacility on the patient’s behalf] is sufficientto establish interstate commerce and theFAA’s application in this case”). In other jurisdictions,however, courts require an affidavitor witness testimony demonstratingthat the underlying transaction for nursinghome care between a nursing home and aresident involved interstate commerce. Thisevidence may include the fact that medicalsupplies are purchased out-of-state, nursinghome equipment is purchased from outof-statesuppliers, residents are from otherstates, nursing homes are almost completelycontrolled by federal regulations, and revenuecomes from federally funded Medicaidor Medicare. See, e.g., Owens v. Coosa ValleyHealth Care, Inc., 890 So. 2d 983, 987–88 (Ala. 2004).Regardless of the necessary proof, it isadvisable to establish that the FAA governsthe admissions agreement at issue to benefitfrom the clear, statutory pronouncementfavoring arbitration. In fact, the FAA hasbeen used successfully by defense attorneysto preempt state statutes that invalidatearbitration provisions in nursing homeadmission agreements. See, e.g., Fosler v.Midwest Care Center II, Inc., N.E.2d, <strong>2010</strong>WL 1286880, at *8 (Ill. App. Ct. <strong>2010</strong>).Furthermore, many jurisdictions haverecognized that policy has favored arbitrationand firmly embedded arbitration inboth federal and state law. After all, arbitrationprovides parties with an expeditiousand economical means of resolvinga dispute while, at the same time, unburdeningcrowded court dockets. In light ofthe strong presumption favoring arbitration,many courts have held that “all doubtsshould be resolved in its favor.” Hayes v.Oakridge Home, 908 N.E. 2d 408, 412 (Ohio2009). <strong>The</strong>refore, when arguing in favor ofan arbitration agreement, a defense attorneyshould emphasize the policy favoringarbitration and ask a court to “apply thepolicy of the FAA to ‘rigorously enforceagreements to arbitrate.’” <strong>For</strong>est Hill NursingCtr., Inc. v. McFarlan, 995 So. 2d 775,779 (Miss. Ct. App. 2008).<strong>The</strong> Resident as ThirdpartyBeneficiaryFrequently, family members admit theirloved ones to nursing homes and signadmission documents on behalf of the residentswho benefit from the nursing homes’services. Acknowledging this reality, courtsin some jurisdictions have enforced arbitrationagreements against non- signatoriesby determining that residents were thirdpartybeneficiaries of the arbitration agreements.See, e.g., Alterra Healthcare Corp. v.Estate of Linton ex rel. Graham, 953 So. 2d574, 579 (Fla. Dist. Ct. App. 2007).<strong>For</strong> example, in <strong>For</strong>est Hill Nursing Center,Inc. v. McFarlan, 995 So. 2d 775, 779(Miss. Ct. App. 2008), the plaintiff’s grand-<strong>For</strong> <strong>The</strong> <strong>Defense</strong> n <strong>July</strong> <strong>2010</strong> n 53
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