W. Va. high court rules forced arbitration clauses in nursing home agreements are unconscionable

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July 21, 2011

W. Va. high court rules forced arbitration clauses in nursing home agreements are unconscionable 

While the court found that the Federal Arbitration Act preempts a state law providing that any arbitration clauses in contracts between nursing homes and residents are null and void, it ruled that "Congress did not intend for arbitration agreements, adopted prior to an occurrence of negligence that results in a personal injury or wrongful death" to be covered by the act.

Matthew Malamud

The Supreme Court of Appeals of West Virginia recently held that nursing home residents’ injury or wrongful death negligence claims are not subject to predispute mandatory arbitration clauses. In fact, the court found such clauses unconscionable and unenforceable. (Brown v. Genesis Healthcare Corp., 2011 WL 2611327 (W.Va., June 29, 2011)).

The court conceded that the Federal Arbitration Act (FAA) preempts a West Virginia law rendering any arbitration clause null and void in a contract between a nursing home and a resident. However, it concluded, “Congress did not intend for arbitration agreements, adopted prior to an occurrence of negligence that results in a personal injury or wrongful death, and which require questions about the negligence be submitted to arbitration, to be governed by the Federal Arbitration Act.”

The U.S. Supreme Court has not directly addressed the enforceability of an arbitration clause in a health care contract, nor the application of the FAA to an arbitration agreement in the context of a personal injury or wrongful death claim, the court noted. However, beginning in 1984 with its decision in Southland Corp. v. Keating, the U.S. Supreme Court “has stretched the application of the FAA from being a procedural statutory scheme effective only in the federal courts, to being a substantive law that preempts state law in both the federal and state courts,” wrote West Virginia Supreme Court of Appeals Justice Menis Ketchum in the opinion.

The Brown decision consolidated three cases; in each, a family member of a deceased nursing home resident sued the nursing home, alleging that the home’s negligence resulted in the resident’s death. The nursing homes sought to compel binding arbitration according to the terms of their admissions contracts. In two cases, the trial court agreed with the nursing home and the plaintiffs appealed the rulings. In the third case, the trial court sought the guidance of the state’s high court regarding the arbitration clause’s enforceability.

In its opinion, the court observed that unlike typical commercial transactions, “people entering a nursing home have to sign admissions contracts in the midst of a crisis, without time to comparison shop or to negotiate the best service and price combination.” The court added, “In such an environment, it is common that residents or their family members rarely know that the admission contract contains provisions that go far beyond the medical care and other services the facility promises (or is expected) to provide and that, instead, have serious implications for their legal and constitutional rights.”

James McHugh, an attorney for one of the plaintiffs, hailed the ruling as an “exceptionally significant” decision. “It stops the erosion of rights of frail and elderly people who depend on others to provide their care,” he said. McHugh said the court was correct to recognize that “this is not the type of setting where two sophisticated representatives of corporations sit down and hash out details of a deal and then agree knowingly that an appropriate venue for settling differences is arbitration.”

For Roy Turner, an attorney in Virginia who represents victims of nursing home negligence, the decision offers hope for plaintiffs whose disputes otherwise would be resolved behind closed doors. “Arbitration just isn’t fair” with its manifold disadvantages, including the cost, limited damages, the arbitrator’s potential bias, and the decision’s binding nature, he said.

“The court’s ruling gives us some great guidelines to use in arguing that a contract is unconscionable or one of adhesion,” said Turner, noting that nursing homes across the country increasingly are inserting arbitration clauses into their admissions contracts.

In West Virginia, “Nursing homes can no longer avoid accountability, nor can they hide their failures through a process that effectively prevents the public from learning of their poor behavior,” said McHugh, whose firm is handling more than 50 cases of nursing home neglect in the state. Many of those cases would have been forced into arbitration before the court’s decision in Brown.


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