Harkness on Enforceability of Nursing Home Arbitration Agreements

Harkness on Enforceability of Nursing Home Arbitration Agreements


Inclusion of arbitration agreements within nursing home admissions contracts is a growing trend, and arbitration is being used by long term care providers as a means to keep malpractice and other negligence claims from coming before a jury. In this Commentary, Donna S. Harkness discusses the litigation challenging the validity of such agreements on grounds of contractual invalidity, public policy, and unconscionability. She writes:
 
     In Lacey v. Healthcare and Retirement Corp. of America, 918 So. 2d 333, 2005 Fla. App. LEXIS 18807, 30 Fla. L. Weekly D. 2681 (Fla. App. 2005) (Nov. 30, 2005), plaintiffs were faced with an arbitration agreement that limited the amount of non-economic damages that they could claim to $250,000 and which further waived any claim for punitive damages. Both provisions were in violation of the Florida Nursing Home Residents Act, § 400.0060 et seq. Fla. Stat. (2004) which specifically allowed for unlimited compensatory and punitive damages. The Florida Appeals Court determined that the entire arbitration agreement was rendered void as a matter of public policy, due to the lack of any severability clause.
 
     However, advocates cannot count on the court voiding an entire arbitration agreement simply because of the presence of clauses that are illegal or void as against public policy. This is especially true where the arbitration agreement contains a severability clause. Such a provision specifically authorizes the elimination of any clause which is found to be illegal or unenforceable from the contract as a whole, which then allows the contract to be enforced as it stands without the offending clause.
 
     In Bruner v. Timberlane Manor, 2006 OK 90, 155 P.3d 16, 2006 Okla. LEXIS 94 (Ok, 2006) (Dec. 12. 2006) reh. denied 2007 Okla. LEXIS 6 (Ok. 2006) (Jan. 29, 2007), the arbitration agreement at issue was in violation of Oklahoma’s Nursing Home Care Act, 63 O.S. 2001, SI-1939(D) & (E). The nursing home defendants attempted to avoid application of the state law by asserting preemption by the Federal Arbitration Act, and defendants introduced proof to establish the impact of nursing home operations on interstate commerce. The Court in Bruner did not find the activity alleged to be of a nature substantial enough to invoke federal preemption in this case, noting that the main interstate nexus asserted by the defendants, that of federal payment through the Medicare and Medicaid programs, was generated by Congress pursuant to the Spending Powers and not the Commerce Clause power. The Court then observed that the Medicare and Medicaid programs themselves were replete with references to state law as governing much of the regulation that surrounds quality of care in nursing homes. Finally, the arbitration agreement itself made reference to Oklahoma law as governing, a fact that the Court found to be compelling, whether or not the Federal Arbitration Act was applicable. Where the agreement itself references state law, the pre-emption question is moot.
    
(citations omitted)