Mandatory Arbitration Agreements in Long-term Care Contracts: How to Protect the Rights of Seniors in Washington

• Publication year: 2011

SEATTLE UNIVERSITY LAW REVIEWVolume 35, No. 1FALL 2011

COMMENTS

Mandatory Arbitration Agreements in Long-Term Care Contracts: How to Protect the Rights of Seniors in Washington

Beth Davis(fn*)

I. Introduction

In January 2010, the Seattle Times began the first comprehensive accounting of adult family homes in Washington State.(fn1) The six-part series, titled "Seniors for Sale," reported that "[a]dult family homes in the state are seen as a national model, and in King County alone, they've become more plentiful than Starbucks stores. But the explosive growth, fueled by profiteers and a lack of careful state regulation, is leaving thousands of people vulnerable to harm."(fn2) By September, the Times reported that it had uncovered at least 236 deaths indicating neglect or abuse.(fn3)

Examples of the neglect and abuse uncovered in these homes included the stories of Jean Rudolf and Clarence Yesland, who were eighty-seven and eighty-four years old, respectively.(fn4) Jean Rudolph died from an infection caused by seven pressure sores, some of which were so deep that they left bone and muscle exposed.(fn5) Doctors revealed that the wounds had gone untreated for weeks.(fn6) Clarence Yesland suffered from a broken hip but was unable to communicate his pain due to dementia.(fn7) Narcotics prescribed by Clarence's doctor could have dulled his pain; however, Clarence's caretaker told members of his family that "the drug would hasten his death."(fn8) Clarence's caretaker used this lie to cover up her theft of Clarence's pills in order to sell them to a caregiver with a drug problem at a separate adult home.(fn9) Without the investigative work of the Seattle Times, the public would not have learned of the stories of Jean or Clarence, or of the hundreds of deaths that resulted from similar instances of abuse across the state.(fn10)

The public's ignorance of this abuse is, in part, due to the fact that many of the long-term care (LTC) facilities in Washington have mandatory arbitration agreements in their admission contracts.(fn11) Because arbitration is confidential,(fn12) if the representatives of neglected seniors wanted to hold these facilities accountable, their stories would be hidden from public view in the arbitration process.(fn13)

In addition to avoiding reputation-damaging litigation, arbitration agreements offer multiple benefits over litigation for the LTC industry. Consider the example of deceased nursing home patient Henry Woodall.

In August 2010, the Washington Court of Appeals informed Henry's heirs that Henry's survival claims must be arbitrated under his agreement with the Avalon Care Center in Federal Way.(fn14) As a result, Henry's heirs must argue his case in front of an arbitration panel, which will likely be selected by the nursing home,(fn15) rather than before a judge and jury. When Henry signed the arbitration agreement on the date of his admission, he unknowingly waived his constitutional right to a jury.(fn16) In addition, Henry signed away his right to appeal the outcome of his case, as an arbitrator's decision is almost always binding.(fn17) Moreover, arbitration agreements often have damage caps, and even if they are not capped, the average damage award in arbitrated cases is 35% less than in nonarbi-trated cases.(fn18) While proponents of arbitration agreements argue that arbitration leads to cost-savings and a quicker judgment,(fn19) the nursing home industry usually realizes these benefits, not the residents and their families.(fn20)

Many advocates for LTC patients have argued that Congress should prohibit the use of mandatory arbitration agreements in LTC contracts.(fn21) While a bill that addresses this issue, the Arbitration Fairness Act of 2009, has been introduced into Congress, it is unclear if and when a vote will be held.(fn22) In order to address immediate concerns, a few states, such as Illinois and New Jersey, have enacted state legislation prohibiting mandatory arbitration agreements in nursing home contracts.(fn23) But courts recently struck down both statutes due to incompatibility with the Federal Arbitration Act (FAA).(fn24) The FAA preempts any state law that disfavors the enforcement of arbitration agreements.(fn25) But state laws that merely govern the procedures of arbitration are outside the FAA's preemptive scope.(fn26) Thus, while a similar statute has not been enacted in Washington, courts will likely find that the FAA preempts any statute attempting to prohibit rather than regulate arbitration agreements.

This Comment explores the problems associated with the use of mandatory arbitration agreements in LTC contracts and proposes that Washington legislators regulate arbitration procedures in consumer arbitrations in a manner similar to legislation adopted in California. Part II of this Comment provides a brief history of arbitration agreements in the United States. It also discusses the increasing use of mandatory arbitration agreements in the LTC context. Part III examines the current approaches to challenging mandatory arbitration and ultimately concludes that these approaches are inadequate to address the problems presented by mandatory arbitration agreements in LTC contracts. Part IV proposes a new approach to controlling these agreements in LTC contracts in Washington-regulating the procedures of arbitration by requiring arbitration companies to report information about consumer claims they administer.

II. Historical Background

The Supreme Court has taken "a bipolar approach to arbitration" throughout its history.(fn27) Although the Court traditionally rejected the use of arbitration agreements, the current Court is a strong supporter of arbitration, even where it is mandatory.(fn28) As such, mandatory arbitration agreements have become the status quo in a variety of settings, including LTC admission contracts.(fn29)

A. History of Arbitration in the United States and Washington

Until 1925, courts generally disfavored the use of predispute mandatory arbitration agreements.(fn30) Many courts found these contract clauses unenforceable and considered them revocable at will.(fn31) The rejection of arbitration agreements may have been a response to the fact that these agreements would "oust the courts of jurisdiction."(fn32) In 1925, however, court opinion shifted in favor of arbitration agreements as a result of Congress's enactment of the FAA.(fn33) The FAA expressed congressional support of alternative dispute resolution and confirmed the valid and enforceable nature of arbitration agreements.(fn34) Section 2 of the FAA provides in pertinent part:A written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.(fn35)

The courts have interpreted the FAA as manifesting a "liberal federal policy favoring arbitration agreements."(fn36) The Supreme Court determined that Congress enacted the FAA pursuant to its commerce authority and therefore gave courts broad preemptive power over state laws disfavoring arbitration.(fn37) Following the enactment of the FAA, many states consented to the federal government's endorsement of arbitration.(fn38) For instance, Washington legislators have since adopted their own version of the FAA, known as the Uniform Arbitration Act.(fn39)

The Court's opinion regarding enforcement of arbitration agreements has not always been consistent. In 1953, court opinion shifted away from the liberal enforcement of arbitration agreements when the Supreme Court decided Wilko v. Swan.(fn40) In Wilko, the Court refused to enforce the arbitration agreement between an investor and a brokerage house, holding that the "Securities Act was drafted with an eye to the disadvantages under which buyers labor."(fn41) Moreover, the Court found that it was "inappropriate to find that the customer had knowingly selected arbitration" because the sellers had more information available to them than the buyer.(fn42) But in 1989, the Supreme Court changed course one more time and overruled Wilko in Rodriguez de Quijas v. Shear-son/American Express.(fn43) The Court held that Wilko was "incorrectly decided" and was "inconsistent with the prevailing uniform construction of other federal statutes governing arbitration agreements," which favors arbitration.(fn44) Since its decision in Rodriguez de Quijas, the Court has upheld the use of arbitration agreements in a variety of settings, including commercial and employment disputes, as well as claims under the Americans with Disabilities Act.(fn45) In a recent decision from April 2011, the Court went so far as to validate arbitration clauses containing class-action waivers in consumer contracts.(fn46) This decision may motivate companies to add these clauses to their consumer contracts in order to avoid class actions.

While arbitration and litigation are somewhat similar, there are significant differences that exist between them. First, arbitration agreements often limit the scope of discovery and the rules of evidence.(fn47) While it may not...