Undisclosed Arbitration Clause in the Doctor-Patient Agreement Held Unenforceable

By Alex Stein

STEIN on Medical Malpractice has published a survey of noteworthy court decisions in the field for 2017. This survey includes an important decision, King v. Bryant, 795 S.E.2d 340 (N.C. 2017), that examines the validity of a doctor-patient agreement to arbitrate disputes over medical malpractice.

A front desk employee at a surgeon’s practice provided the patient with several intake forms to complete and sign while he waited to meet the surgeon. The forms included an agreement to arbitrate medical malpractice disputes, which the patient signed without reading (together with other documents) because he believed it to be “just a formality.” After an unsuccessful surgical procedure, the patient sued the surgeon in court for medical malpractice. The surgeon filed a motion to stay the action and enforce the arbitration agreement. The trial court denied the motion after finding the arbitration agreement unconscionable. The Court of Appeals affirmed that decision and the surgeon appealed to the North Carolina Supreme Court. Continue reading

Forced Christian Arbitration Agreements Trivialize Health Care

It is no secret that more and more for-profit companies and non-profit organizations are using binding religious arbitration agreements as a means to bypass legal liability. It has been reported that entities that have little or no religious purpose, such as bamboo floor vendors and vocation cabin rental agencies, have quietly inserted binding arbitration clauses into everyday agreements. In the event of a dispute the consumers or victims cannot take these entities to a secular court, but rather to a religious tribunal that claims to be capable of settling any dispute using their interpretations of the Bible. A common reaction against these questionable practices follows this line of critique: shouldn’t religious arbitration, if tolerated at all, only be used for disputes concerning religious or spiritual matters on which the secular courts cannot adjudicate? What does buying bamboo floors or renting a vocation cabin have anything to do with Christian doctrines?

Unfortunately, these questions cannot adequately challenge the religious reasoning behind Christian arbitration agreements. This is due to the counter-intuitive fact that, according to relevant biblical texts, disputes settled in a so-called Christian arbitration tend not to be about important spiritual matters, but trivial matters instead. Here is the text pertaining to lawsuits among Christian believers:

“When one of you has a grievance against a brother, does he dare go to law before the unrighteous instead of the saints? Do you not know that the saints will judge the world? And if the world is to be judged by you, are you incompetent to try trivial cases? Do you not know that we are to judge angels? How much more, matters pertaining to this life! 4    (1 Corinthians 6: 1-4)

At first look, these verses seem to make a strong case for Christian arbitrations. However, upon a closer look, it could be argued that Christians can still settle disputes with others in court under certain circumstances. Verse 1 suggests that Christians shouldn’t “dare to go to law before the unrighteous instead of the saints,” but it only excludes the court system if we assume that the judges at the civil courts are all “unrighteous sinners”. What if they’re not? What if some judges turn out to be devout Christians in private or possess “righteous” and “saintly” qualities? The remaining verses all point to the scope of judging powers the believers are entitled to, since they are to judge the entire world and even angels. Nonetheless, the structure of these rhetorical questions is meant to convince the believers that because they are qualified to judge angels, trivial earthly matters should be a piece of a cake. Since the disputes between Christians are not at all about angels or the whole world, these lines essentially imply that the matters that fall under the purview of Christian arbitrations are precisely trivial matters pertaining to this life on earth, not complicated spiritual affairs. Continue reading

Does an Arbitration Clause in a Nursing Home Agreement Preclude Tort Actions Relating to the Resident’s Wrongful Death?

By Alex Stein

Arbitration clauses in nursing home agreements are pretty much standard. Whether such a clause precludes tort actions complaining about the resident’s wrongful death is consequently an important issue.  The Pennsylvania Supreme Court has recently addressed this issue in Taylor v. Extendicare Health Facilities, Inc., 147 A.3d 490 (Pa. 2016). In that case, the resident’s family members sued the nursing home in their individual capacity as derivative victims of the alleged tort (the wrongful death action) and as representatives of the resident’s estate (the survival action). In the wrongful death action, the plaintiffs sought compensation for the emotional harm they sustained from losing their loved one prematurely and possibly for their economic losses as the resident’s dependents (the Court’s decision provides no details on that). The survival suit, on the other hand, focused on the resident’s entitlement to be compensated for pain and suffering and other harms she sustained from the alleged negligence. This entitlement belonged to the resident’s estate rather than her successors as individuals.

The agreement between the resident and the nursing home contained a standard compulsory arbitration provision that covered any resident’s suit against the nursing home. This provision consequently extended to the survival action, but not to the wrongful death suit filed by the nonparties to the agreement. However, under Pennsylvania Rule of Civil Procedure 213(e), wrongful death and survival actions cannot be bifurcated and must be tried together. Based on that rule, the trial court decided that the two actions must be consolidated, and because one of the actions fell outside the scope of the arbitration provision, both actions should go to trial.

The Pennsylvania Supreme Court overturned this decision for failure to account for the Federal Arbitration Act (FAA), as interpreted (inter alia) in Southland Corp. v. Keating, 465 U.S. 1, 3 (1984); Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983); Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985); AT & T Mobility LLC v. Concepcion, 563 U.S. 333, 346 (2011); and KPMG LLP v. Cocchi, 132 S.Ct. 23, 26 (2011).  Continue reading

CMS Prohibits Arbitration Clauses in Long-Term Care Facility Contracts

By Wendy S. Salkin

On Wednesday, the Centers for Medicare and Medicaid (CMS)—an agency within the Department of Health and Human Services (HHS)—released a final rule that “will revise the requirements that Long-Term Care facilities [LTCs] must meet to participate in the Medicare and Medicaid programs” (1). (Almost all LTCs receive funds from Medicare or Medicaid.) This is the first time that these requirements have been “comprehensively reviewed and updated since 1991” (6)—that is, in the past 25 years. One of the most striking changes to the regulation is found in §483.65, where CMS “require[es] that facilities must not enter into an agreement for binding arbitration with a resident or their representative until after a dispute arises between the parties” (12) which means that CMS is “prohibiting the use of pre-dispute binding arbitration agreements” (12). Among the reasons provided by CMS for this change is a recognition of the notable power differential between LTCs and their residents:

There is a significant differential in bargaining power between LTC facility residents and LTC facilities. LTC agreements are often made when the would-be resident is physically and possibly mentally impaired, and is encountering such a facility for the first time. In many cases, geographic and financial restrictions severely limit the choices available to a LTC resident and his/her family. LTC facilities are also, in many cases, the resident’s residence. These facilities not only provide skilled nursing care, but also everything else a resident needs. Many of these residents may reside there for a prolonged period of time, some for the rest of their lives. Because of the wide array of services provided and the length of time the resident and his/her family may have interactions with the LTC facility, disputes over medical treatment, personal safety, treatment of residents, and quality of services provided are likely to occur. Given the unique circumstances of LTC facilities, we have concluded that it is unconscionable for LTC facilities to demand, as a condition of admission, that residents or their representatives sign a pre-dispute agreement for binding arbitration that covers any type of disputes between the parties for the duration of the resident’s entire stay, which could be for many years. (402-403)

As The New York Times reported, when the rule was first proposed in July 2015, it was “aimed at improving disclosure.” But, this final version of the rule “went a step further than the draft, cutting off funding to facilities that require arbitration clauses as a condition of admission.”

Continue reading

Compulsory Arbitration Clause in Nursing Home Agreements: The NAF Saga Continues

By Alex Stein

As I reported a year ago, the National Arbitration Forum (NAF) was a designated arbitrator in thousands of nursing home agreements. When a nursing home resident complained about medical malpractice or other mistreatment, her complaint had to be arbitrated before NAF and according to NAF’s rules. If the resident or her successors were to sue the nursing home in court, the court would have to stay the proceeding and compel arbitration, as mandated by Section 2 of the Federal Arbitration Act (FAA) that deems written arbitration agreements “valid, irrevocable, and enforceable.”

Six and a half years ago, things have changed dramatically. In July 2009, the Minnesota Attorney General filed a complaint against NAF and related entities, accusing them of violations of the Minnesota Prevention of Consumer Fraud Act. The complaint alleged that NAF held itself out to the public as an independent arbitration company, while at the same time working against consumers’ interests and that it “earns revenue when it convinces companies to place mandatory predispute arbitration agreements in their customer agreements and then to appoint the Forum to arbitrate any future disputes.” Shortly thereafter, the parties entered into a consent judgment under which NAF agreed that it would not administer, process, or participate in any consumer arbitration filed on or after July 24, 2009.

Based on caselaw that followed this judgment, I estimated that the judgment effectively annulled the arbitration clause in thousands of agreements between nursing homes and residents. See, e.g., Riley v. Extendicare Health Facilities, Inc., 826 N.W.2d 398 (Wis.App. 2012); Estate of Cooper v. Evangelical Lutheran Good Samaritan Soc., 2013 WL 4526274 (N.M.App. 2013); Miller v. GGNSC Atlanta, 746 S.E.2d 680 (Ga.App. 2013); Sunbridge Retirement Care Associates v. Smith, 757 S.E.2d 157 (Ga.App. 2014).

Against this estimation, the Arkansas Supreme Court has recently ruled that the arbitration clause in nursing home agreements is enforceable conditional on the substitution of NAF by a different arbitrator. The new arbitrator, the Court held, will decide the parties’ dispute by applying the NAF procedural code for arbitration. Courtyard Gardens Health and Rehabilitation, LLC v. Arnold, — S.W.3d —- (Ark. 2016). Continue reading

Another Blow to Nursing Home Arbitration Agreements

By Alex Stein

Most, if not all, nursing homes have their residents sign an agreement to arbitrate any dispute or disagreement arising out of or in connection with the care rendered to the resident by the nursing home, including claims by the resident involving, and/or arising out of conduct committed by the nursing home and/or its agents, employees, or others for whom and/or which the nursing home is, may be, or is asserted to be, legally responsible. Such agreements also stipulate that they will apply to and bind any and all persons and/or entities who and/or which may assert a claim on behalf of, or derived through, the resident, including, without limitation, the resident’s legal representative, guardians, heirs, executors, administrators, estate(s), successors and assigns.

Ostensibly, such agreements compel arbitration on the resident’s survivors who claim that the resident died prematurely as a result of the nursing home’s neglect. The Federal Arbitration Act (FAA), as interpreted in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), seems to support this observation. This Act requires state and federal courts to enforce arbitration agreements similarly to other contracts. Pursuant to this Act, when a resident’s survivor files a wrongful death suit against the nursing home, the court must stay the proceeding and direct the parties to arbitration.

However, a recent decision of the Oklahoma Supreme Court, Boler v. Security Health Care, L.L.C., — P.3d —- (Okla. 2014), has shown that this appearance is misleading.  Continue reading

Implications of the NAF Fiasco for Nursing Home Agreements

By Alex Stein

Until recently, the National Arbitration Forum (NAF) was a designated arbitrator in thousands of nursing home agreements. When a nursing home resident complained about medical malpractice or other mistreatment, her complaint had to be arbitrated before NAF and according to NAF’s rules. If the resident or her successors were to sue the nursing home in court, the court would have to stay the proceeding and compel arbitration, as mandated by Section 2 of the Federal Arbitration Act (FAA) that deems written arbitration agreements “valid, irrevocable, and enforceable.”

Five years ago, things have changed dramatically. Continue reading

Agreements to Arbitrate Medical Malpractice Claims: Positive Law

By Alex Stein

Can a healthcare provider make an arbitration agreement with patients for resolving future malpractice disputes?

This question has no straightforward answer. As an initial matter, one needs to separate individual arbitration agreements between doctors and patients from group health plans for employees. A group health plan that obligates employees to arbitrate medical malpractice claims is valid and enforceable: see Madden v. Kaiser Foundation Hospital, 552 P.2d 1178 (Cal. 1976). The plan’s designers—employers on one side and MCOs/HMOs on the other side—have roughly equal bargaining powers and cannot easily take advantage of one another. Their preference for arbitration is part of a well thought-through deal that includes an attractively priced health benefits package for employees (such deals do not always promote the employees’ best interest, but this is a story for another occasion: see here).

With individual arbitration agreements things are markedly different. Continue reading