Arbitration agreements between nursing homes and their residents have long been permitted by Tennessee courts as long as the agreements are not "unconscionable." Unfortunately, Tennessee courts have generally failed to define what makes a nursing home admission agreement with arbitration provisions unconscionable, and this absence of guidance has left nursing home operators without a roadmap for drafting arbitration provisions that will be enforceable. Fortunately, opinions rendered in a recent case before the Tennessee Court of Appeals offer some insight into the judicial process of determining whether arbitration provisions in contracts between nursing homes and their residents are unconscionable.
The opinions rendered by the Honorable Patricia J. Cottrell and the Honorable Frank G. Clement, Jr. focused on three facts that may ultimately determine whether an arbitration provision in an admission agreement is enforceable or unconscionable:
- The advance payment of arbitration fees
- The compelling time constraint experienced by the
resident
- The inability of the resident to revoke the arbitration
provision
With respect to arbitration fees in this case, the nursing home admission agreement contract required the resident to remit arbitration fees in advance of any proceedings she commenced or abandon her legal remedies. The contract specified that the arbitration fees could be as high as $18,000. The opinions found this requirement to be onerous when contrasted with the minuscule sum the resident would have been required to spend to commence a civil action seeking the same relief. The opinions also held that the resident's immediate need for nursing home care created a compelling time constraint in her deciding whether to waive her right to a jury trial, especially when considered in light of her inability to revoke the arbitration provision. The opinions point out that Tennessee courts have been reluctant to enforce arbitration agreements which have the effect of requiring a patient to choose between forever waiving the right to a trial by jury or foregoing necessary medical treatment. In order to reduce such time constraints and to help establish the reasonableness of their contracts, the opinions suggest that nursing home operators either move arbitration provisions into a separate freestanding agreement or include a reasonable period of time to revoke the arbitration provision.
Of equal interest were the facts that the opinions did not consider critical to determining whether or not the arbitration provisions were unconscionable or enforceable. Neither of the opinions emphasized whether the nursing home did or did not provide the resident with a thorough explanation of the nuances of binding arbitration provisions since no explanation had been requested by the resident. In addition, neither opinion focused on the absence of an explanation regarding binding arbitration in the contract or the lack of any language in the agreement that would have encouraged the resident to ask questions about the process. According to Clement's opinion, the nursing home's only affirmative duty with respect to the arbitration provision was to disclose its existence to the resident.
In light of these opinions, nursing home operators may want to reexamine their standard admission agreements to make sure that any binding arbitration provisions do not contain factors similar to those cited by the opinions leading to their unconscionability (and therefore unenforceability). Specifically, provisions which require residents to advance arbitration fees materially greater than what would be required to commence a civil action should be examined to determine whether they would be viewed as excessive. In addition, nursing home operators may want to consider granting residents a reasonable period of time during which they may revoke any binding arbitration provisions in order to establish a presumption of reasonableness. Alternatively, the arbitration agreement could be separate and apart from the admission agreement.
This would reduce the real or perceived pressure on residents to choose between forever waiving the right to a trial by jury or foregoing necessary medical treatment. Finally, nursing home operators will want to be sure that they disclose the existence of any binding arbitration clauses to potential residents, although, as the case makes clear, there is no affirmative obligation to explain the nuances of such clauses absent a request or to encourage potential residents to ask questions regarding the arbitration process.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
