Challenging Arbitration Agreements

Nursing home operators routinely ask residents to sign an agreement at the time of admission that requires that any future disputes be resolved by arbitration instead of through a jury trial. Usually, the agreements are provided with a host of other documents signed at the time of admission. It has been our experience that residents are often given cursory, incomplete or misleading information about the effect of these agreements.

Everyone has a constitutional right to resolve a personal injury or wrongful death case through our civil justice system, including having a jury decide the merits of their case and the reimbursement that is appropriate for medical expenses and emotional losses. This is an important right and one that should not be waived in the nursing home setting. This is because, in arbitration, the case will be decided by one to three arbitrators, who are typically attorneys that have a great deal of experience handling personal injury and nursing home cases. With that background, arbitrators have been exposed to cases involving all sorts of negligent conduct and catastrophic damages including death. Because of this, the concern is that the arbitrators may be somewhat desensitized to the losses and the conduct that caused them. In addition, it is usually more difficult in an arbitration case to obtain the volume of documents that are required to prove understaffing, the amount of money the nursing home operator saved by understaffing and the hidden profits made by the nursing home owners.

When we are presented with a nursing home case with a signed arbitration agreement, we always look for ways to challenge its enforceability. There are several different ways to do this. First, an arbitration agreement will be unenforceable if the resident did not have the mental capacity to understand the "nature and effect" of the agreement at the time he or she signed it. As It is estimated that more than half of nursing home residents have dementia, the lack of mental capacity is a common basis for challenge. However, a diagnosis of dementia, if the dementia is in its early stages, does not necessarily mean that a person lacks capacity to enter into an agreement. In situations where it is not clear from the medical records whether the resident had capacity, it is necessary to develop proof of that person's inability to understand moderately complex concepts.

To understand an arbitration agreement, the resident must be able to comprehend:

  1. That he or she could be injured in the future by nursing home neglect;
  2. That there are different methods of resolving claims for injuries;
  3. That arbitration and jury trials are mutually exclusive resolution methods; and
  4. The basic differences between arbitration and jury trials.
Often, relatives can provide helpful examples of things the resident had difficulty understanding to help prove the person lacked capacity. Some such examples include: the inability to handle financial transactions; the inability to comparison shop when making a purchase; and the inability to make plans for future events.

Another basis for challenging an arbitration agreement can arise when a person other than the resident signed the arbitration agreement. In order for someone else to be able to sign on a resident's behalf, there must be a legally valid power of attorney in effect. Otherwise, a family member or spouse cannot sign on the resident's behalf. A power of attorney signed after the person had already lost capacity is invalid for the same reason that an arbitration agreement signed under such circumstances is invalid. If a power of attorney was signed while the resident had capacity, but the resident lost capacity afterwards, then a standard power of attorney will be invalid as a durable power of attorney is required. A durable power of attorney specifically provides that the power of attorney will remain effective in the event the person loses capacity in the future. Finally, any power of attorney executed in Florida is invalid unless it is: signed by the principal; there are two witnesses to the signature; and the signatures are notarized.

Additional grounds to challenge an arbitration agreement can come from the language in the agreement itself. If the agreement is ambiguous in its terms, such ambiguities will be construed against the nursing home operator, as it is the one that drafted the agreement. Finally, the nursing home employee that presented the agreement to the resident can provide a basis for challenge if, when deposed, he or she does not understand the agreement and inaccurately described the agreement to the resident.

In short, arbitration agreements in nursing home cases are to be avoided, if at all possible. Hiring a lawyer experienced in challenging arbitration agreements is essential.