For The Defense, July 2010 - DRI Today

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 Wpare to address both procedural and substantiveunconscionability when moving toenforce an arbitration agreement.Procedural UnconscionabilityWith an arbitration agreement, a plaintiff’scounsel may prove procedural unconscionabilityby demonstrating that the familymember who signed the arbitration agreementlacked knowledge or voluntariness.In analyzing this defense, courts considerwhether an arbitration provision was presentedin inconspicuous print and whetheran agreement was drafted in complex orlegalistic terms that are difficult for a layperson to understand. See, e.g., Shotts v. OPWinter Haven, Inc., 988 So. 2d 639, 641–42(Fla. Dist. Ct. App. 2008) (finding an arbitrationprovision valid when it has beenworded clearly and separated and conspicuousfrom other admission documents).Courts also consider whether a disparityexists in the sophistication or bargainingpower of the parties and whether the individualsigning the agreement lacked opportunityto study the contract and inquireabout its terms. See Romano ex rel. Romanov. Manor Care, Inc., 861 So. 2d 59, 63–64(Fla. Dist. Ct. App. 2003) (finding an arbitrationprovision invalid since both thehusband and resident were elderly andthe defense failed to show that the husbandhad the legal training to understandagreement); c.f. Hayes v. Oakridge Home,908 N.E.2d 408, 413–14 (Ohio 2009) (findingan arbitration agreement was not procedurallyunconscionable solely becausethe resident was 95 years old). Additionally,courts frequently consider whetherthe family member executing the agreementwas granted the opportunity to seeklegal counsel, whether signing the agreementwas a precondition to admission, andwhether the contract could be rescinded.See, e.g., Small v. HCF of Perrysburg, Inc.,823 N.E.2d 19, 24 (Ohio Ct. App. 2004)(finding an agreement invalid when thewife executed it without an attorney present);Prieto v. Healthcare and RetirementCorp. of America, 919 So. 2d 531, 533 (Fla.Dist. Ct. App. 2005) (finding an agreementprocedurally unconscionable when a signaturewas required to complete admissionprocess); Miller v. Cotter, 863 N.E.2d 537,546–47 (Mass. 2007) (finding an agreementenforceable when it explicitly was56 n For The Defense n July 2010not a condition of admission); see Estate ofMooring v. Kindred Nursing Ctrs., 2009 WL130184, at *4 (Tenn. Ct. App. 2009) (findingthat an arbitration agreement was nota contract of adhesion when it provided athirty- day rescission period).Procedural unconscionability is mostapparent in contracts of adhesion when anadmission agreement containing an arbitrationprovision is presented on a “take itor leave it” basis. However, an arbitrationagreement that is included in a contractof adhesion should not, by itself, renderthe agreement procedurally unconscionable.Before invalidating a non-negotiablearbitration agreement, a court mustfind that the weaker party, frequently thefamily member, was prevented by marketfactors, timing, or other pressures fromcontracting with another nursing home onmore favorable terms.At the same time, a court may havequalms about enforcing an arbitrationagreement signed by a family member onbehalf of a resident if the arbitration provisionis not a precondition to admission.Importantly, therefore, make an arbitrationprovision easy to understand and print thearbitration provision in bold, large, typefaceso it is easily discernable. Additionally,because most family members feel pressurewhen admitting a resident to a longtermcare facility, a nursing home shouldconsider adding language to an arbitrationagreement that, if a resident or a familymember does not agree to arbitrate, thefacility will assist the resident with findingalternate placement. In this manner,the nursing home can defend itself againsta claim that the arbitration provision wasincluded in a contract of adhesion at atime when the resident or his or her familywas prevented from negotiating betterterms with another provider due to marketpressures.Substantive UnconscionabilityPlaintiffs’ counsel often attempt to provesubstantive unconscionability by arguingthat the terms of an arbitration agreementare unfair or oppressive. Primaryindicators of substantive unconscionabilityinclude contract terms that limit damagesor eligible claims and terms that waiveliability. See Covenant Health & Rehabilitationof Picayune, LP v. Estate of Moulds,ex rel Braddock, 14 So. 3d 695, 702 (Miss.2009) (finding an arbitration agreementsubstantively unconscionable when theprovision awarded all costs to the otherparty if one party failed to comply witharbitration procedures); Fortune v. CastleNursing Homes, Inc., 843 N.E.2d 1216,1220–21 (Ohio Ct. App. 2005) (invalidatingas substantively unconscionable a loserpaysprovision since it would have a stiflingeffect).When reviewing a contract for substantiveunconscionability, courts examine theagreement to determine whether abusiveterms exist that violate the expectationsof, or cause gross disparity between, thecontracting parties. Courts generally findsubstantive unconscionability when anagreement provides an award of attorneyfees to the prevailing party or limits or barscertain damages. See Prieto, 919 So. 2d at533 (finding substantively unconscionablean agreement limiting non- economic damagesand barring punitive damages andattorneys’ fees); But see Hayes, 908 N.E. 2dat 415 (enforcing an agreement in which apunitive damage waiver applied to a residentsince the nursing home also waiveda statutory right to seek costs and attorneys’fees and seek dismissal). If abusiveor restrictive terms exist in an arbitrationagreement, a practitioner should argue thatthe court may sever these provisions fromthe agreement so that the overall purposeof the contract—arbitrating a resident’sclaims against a nursing home—may beeffectuated.ConclusionIt is becoming increasingly difficult fornursing homes to enforce arbitration agreementsthat are signed by someone otherthan a competent resident. However, courtshave enforced these agreements based ona range of legal arguments, including thatpublic policy favors arbitration, the FederalArbitration Act applies, a resident benefitsfrom an agreement as a third party, and asurrogacy statute supports arbitration. Aprudent practitioner will raise as many ofthe applicable arguments as possible whenmoving to enforce an arbitration agreementthat was never signed by a nursinghome resident to assist a nursing home toreap the benefits of arbitration and avoidthe risk associated with a jury trial.