BlogUnconscionable at Its Core: Defeating the Arbitration Clause in a Nursing Home Admissions Contract
Posted by: David Patton Since the U.S. Supreme Court's decision in Citizens Bank v. Alafabco, Inc., which broadly construed the reach of the Federal Arbitration Act, more and more nursing home companies have inserted arbitration clauses into their admissions contracts. Decisions enforcing arbitration clauses in the health care and nursing home context have only served to bolster the confidence of these companies, as they seek to implement this peculiar brand of "tort 'reform' by contract." By discovering crucial facts and placing them in the right legal framework, you should be able to change the landscape completely. The "Outlook" article in the December issue of Professional Negligence Law Reporter describes how you can dispel the myths surrounding the strong policy facing arbitration and convince a court that enforcing an arbitration clause is unfair. Your job as plaintiff's counsel is to expose the unfairness so that ultimately, a jury will get to decide your client's case. Before responding to any motion to compel arbitration, you must conduct discovery. Vigorously contest any defense motions opposing discovery, and make a wide range of inquiries during discovery. You can and should discover certain facts through informal means. Obtain facts outside of formal discovery relating to the circumstances surrounding the admission. Facts should be established via physician and family member interviews and through sworn affidavits. After discovery, place crucial facts within a legal framework to defeat the nursing home's arbitration motion. Capacity-or authority-is the first line of defense in any case. Unconscionability, for example, is a common and useful defense to an arbitration clause. Unconscionability is generally divided into a procedural element and a substantive element. If you press hard enough in discovery, you will generally be able to establish a high degree of procedural unconscionability. Substantive unconscionability focuses on the onerous terms of the arbitration clause, which can be more difficult to establish. Most often, an arbitration clause will simply require arbitration of the dispute and not limit rights in any other way-at least not overtly. Examine an arbitration clause closely to ferret out unconscionable terms. When encountering such a contract term, you should argue that the contract lacks mutual obligations. In some states, such lack of mutuality voids a contract altogether; in other states, this constitutes an indicia of unconscionability. Raise cost as a substantive issue, arguing that rhetoric to the contrary, the cost of arbitration is always going to be higher than handling a matter in court. To bolster your argument, you can reference one study revealing that fees charged by arbitration services can be up to 5,000 percent higher than court fees. A novel but potentially powerful defense is breach of fiduciary duty. The relationship between a nursing home and a resident is one of trust and confidence. Such circumstances typify a fiduciary relationship, and the law in most states is that a contract entered with a fiduciary for which the fiduciary derives a benefit at the expense of the inferior party is presumptively fraudulent. When combined with proof of a resident's illiteracy or diminished capacity, you can use the fiduciary relationship to challenge the validity of an arbitration clause on the basis that it was fraudulently induced. Plaintiff's attorneys may be tempted to respond to a motion to compel arbitration with the argument that "it just isn't fair." First analyze the case at its core: a dispute over the enforceability of a contract term; nothing more, nothing less. Learn how to develop a reasoned, thoughtful response to a motion to compel arbitration that is likely to succeed in court. Then-and only then-is it reasonable to argue that "it just isn't fair." Topics
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